Intra-BRICS trade in local currencies will help exporters: FIEO

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SME Times News Bureau | 30 Mar, 2012

The agreement amongst BRICS members to promote trade in local currencies will reduce Dollar and Euro dependency and insulate exporters from sharp fluctuations in currencies, said M. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO).

While welcoming the agreement, FIEO Chief Friday said that the move will increase intra BRICS trade which is currently at less than its potential.

Intra BRICS exports is around 9 percent while Intra BRICS imports are about 12 percent. India’s trade with BRICS countries was USD 87 billion in 2010-11, showing 45 percent growth, with exports amounting to USD 29.5 billion while Imports accounting to USD 57.5 billion, said Ahmed.

The development banks of the five countries - Brazil, Russia, India, China and South Africa (BRICS) - Thursday signed a master agreement on extending credit facilities in the local currency and the BRICS multilateral letter of credit confirmation facility agreement in the presence of their leaders in New Delhi.

The master agreement is aimed at reducing the demand for fully convertible currencies for transactions among BRICS nations, and thereby help reducing the transaction costs of intra-BRICS trade.

The confirmation facility pact envisages confirmation of lines of credit on receipt of a request from the exporter, the exporter's bank or the importer's bank.

The pacts are expected to scale up intra-BRICS trade, which has been growing at the rate of 28 percent over the last few years, but at USD 230 billion, it remains much below the potential of the five economic powerhouses. BRICS has set a target of USD 500 billion by 2015.

The pacts were finalized after a meeting of trade ministers of the five countries on Wednesday.

FIEO Chief also said, "This move may also address the issue of widening trade deficit amongst few BRICS partners, as trade in local currencies will encourage imports from such countries to countries having favourable trade balance."