New Delhi and Abu Dhabi are looking into the possibilities of creating a mechanism for carrying out bilateral trade in their national currencies, according to a statement by the Indian Commerce Ministry on Tuesday.

The United Arab Emirates has become India's third-biggest trading partner, as bilateral trade between the two exceeded $73 billion last financial year.

In May, the two countries signed the CEPA, a comprehensive economic partnership agreement - the trade volume between the two is predicted to approach $100 billion within the next two to three years.

Food security and bilateral trade in national currencies are on the discussion table, according to Piyush Goyal, the minister of commerce and trade.

Read more: Indian companies have been dodging the US dollar in trade

The negotiations to trade in their local currencies come days after the Indian Directorate General of Foreign Trade made amendments to its trade policy, effectively allowing Indian importers and exporters to pay and receive Indian rupees. 

In addition, the two countries have also agreed to proceed in discussions on generalizing India's Unified Payment Interface (UPI) to be the go-to digital payment platform for facilitating and settling trade payments. 

“Recently UPI payments were enabled in UAE, strengthening India's growing clout as a provider of cutting-edge technology for seamless business globally,” Goyal said.

The minister, furthermore, revealed that India is exploring ways to provide tax incentives to  “certain UAE sovereign investment entities” to invite more investments.

Oil, furthermore, constitutes 62% of overall trade between India and the UAE.

As sanctions against Russian oil and other commodities affect the global economy, countries have been seeking ways to conduct trade outside the economic deadlock of the US dollar and the euro.