India's recent agreement with the UAE to trade in local currencies is a significant step towards the internationalisation of the Indian rupee. Following Russia's decision to sell oil to India in rupees, the agreement marks a trend away from the US dollar as a standard trading currency. India must make the rupee more acceptable if it is to bring its trade performance in line with its growing economic power. The move could also counter the problems caused by India's mounting current account deficit and facilitate export-led growth.