India–Mauritius Partnership Strengthens: Local Currency Trade and the Chagos Deal

India and Mauritius have entered a new phase in their long-standing partnership, with both countries agreeing to push forward trade in local currencies and celebrating a historic sovereignty agreement over the Chagos Archipelago. The announcements came during Mauritian Prime Minister Navinchandra Ramgoolam’s state visit to Varanasi, where he met Prime Minister Narendra Modi. The outcomes reflect not only economic cooperation but also deeper strategic shifts in the Indian Ocean region.

PM Narendra Modi and Mauritius Prime Minister Navin Ramgoolam hold delegation level talks in Varanasi on Thursday (@MEAIndiaX/ANI Photos) | Financial Express

Trade in Local Currencies

During the meeting, both leaders emphasised the importance of moving away from dependence on the US dollar and other third-party currencies. By facilitating trade in Indian rupees and Mauritian rupees, the two nations aim to reduce transaction costs, minimise exposure to exchange rate volatility, and strengthen their financial ties.

This initiative is also supported by the growing digital financial infrastructure between the two countries. India’s Unified Payments Interface (UPI) and RuPay cards have already been launched in Mauritius, laying the groundwork for smoother financial transactions. Central banks from both nations are in discussion to finalise the technical aspects, such as nostro and vostro account arrangements, which will make direct local currency settlements possible.

Economic Package and Strategic Cooperation

Alongside the trade agreement, India has announced a special economic package for Mauritius that spans multiple sectors. Investments will cover port development, air traffic management, healthcare, and animal husbandry, reflecting the comprehensive nature of India’s support. These projects are not only designed to boost Mauritius’s economy but also to enhance its resilience as a small island nation in the global economic system.

The timing of this package is significant. Mauritius has long been an important maritime partner for India in the Indian Ocean, and New Delhi’s sustained support strengthens its "Neighbourhood First" policy while reinforcing the vision of the Indian Ocean—what Modiji terms "Mahasagar"—as a zone of peace and shared prosperity.

The Chagos Islands Agreement

Another major highlight of the visit was Prime Minister Modi’s endorsement of the recent agreement between the United Kingdom and Mauritius regarding the Chagos Archipelago. Under this treaty, sovereignty of the islands, including the Diego Garcia atoll, will be returned to Mauritius, though the UK will continue to manage security operations in Diego Garcia under a long-term arrangement.

India welcomed the agreement as a "historic victory" for Mauritius, noting that it is consistent with global decolonisation efforts. For decades, Mauritius has pressed its claim to the islands, which were separated from it during the colonial period. The deal not only resolves a longstanding sovereignty dispute but also reaffirms Mauritius’s role in international diplomacy. However, concerns remain over the rights of the displaced Chagossian community and the fact that foreign powers will still control security in Diego Garcia, one of the most strategic military bases in the Indian Ocean.

Wider Implications for the Indian Ocean

The announcements from Varanasi carry significant implications for regional geopolitics. For Mauritius, gaining sovereignty over Chagos strengthens its international standing and opens opportunities for resettlement and resource management. At the same time, the local currency trade initiative could shield its economy from global financial fluctuations, enhancing stability and independence.

For India, these developments reinforce its growing leadership in the Indian Ocean. By supporting Mauritius politically, economically, and diplomatically, India is strengthening its position as a key regional power. The Chagos deal, in particular, underscores India’s long-standing advocacy for decolonisation and its commitment to supporting smaller island nations against historical injustices.

On a strategic level, India’s active involvement in Mauritius’s economic and political development also counters the growing influence of external powers in the Indian Ocean, ensuring that the region remains aligned with shared democratic and cultural values.

The MGMM Outlook

India and Mauritius have taken a decisive step in deepening their partnership, marking a shift towards greater economic independence and regional solidarity. The decision to promote trade in local currencies reflects both nations’ determination to reduce reliance on the US dollar and other foreign systems, while strengthening their own financial resilience. With India’s UPI and RuPay already active in Mauritius, this initiative not only paves the way for smoother bilateral transactions but also symbolizes India’s larger vision of empowering friendly nations through digital and economic collaboration. Coupled with the special economic package announced by Prime Minister Modiji—spanning ports, healthcare, and other key sectors—this move underscores India’s commitment to uplift its closest partners and cement the Indian Ocean as a hub of shared prosperity.

Equally important is the endorsement of the Chagos Islands agreement, a historic victory for Mauritius and a milestone in global decolonisation efforts. India’s firm support demonstrates its consistent stand for justice, sovereignty, and the dignity of smaller nations, while also countering the growing influence of external powers in the Indian Ocean. By backing Mauritius in this long struggle and ensuring its rightful place in the international order, India has reaffirmed its role as both a trusted ally and a responsible regional leader. These developments reflect not only a stronger India–Mauritius bond but also a broader push to build a more balanced, independent, and cooperative Indian Ocean region.

(Sources: Financial Express, The Tribune India, Times of India)