Roving Periscope: Amid soaring Indian exports worldwide, talks for Indo-Russian trade settlement in INR suspended
Virendra Pandit
New Delhi: After months of negotiations failed to convince Russia, New Delhi, and Moscow have ‘suspended’ negotiations to settle their bilateral trade in Indian Rupees (INR), even as India’s exports worldwide in FY24 are expected to soar to over USD 900 billion.
The two countries are also looking for alternatives to bilateral trade settlement in INR.
According to media reports on Thursday, with a wide trade gap in its favor, Russia exports more than it imports from India—which means Moscow may end up ‘piling up’ the Indian currency.
Moscow’s disinterest, therefore, could be a major setback to Indian importers of cheap oil and coal from Russia as they were awaiting a permanent INR payment mechanism to help lower currency conversion costs.
If the INR settlement is accepted, Moscow could end up with an annual rupee surplus of over USD 40 billion. The INR is not fully convertible. India’s share of global exports of goods also is just about 2 percent which prevents other countries from accumulating much INR.
Indian imports from Russia, mainly crude, multiplied nearly 12 times after the Russian invasion of Ukraine on February 24, 2022. Soon after this war began, India started exploring an INR settlement mechanism with Russia but no progress was reported. Most of the Indo-Russian trade settlement continues in US dollars but some of it is being carried out in other currencies like the UAE’s dirham.
The media reports said Russia is not comfortable holding INR and wants to be paid in Chinese yuan or other currencies.
Since Russia’s invasion of Ukraine, India’s imports from Russia soared from USD 10.6 billion in FY22 to USD 51.3 billion now.
India’s import of discounted Russian oil has since surged twelve-fold, but New Delhi’s exports to Moscow fell from USD 3.61 billion to USD 3.43 billion now.
While third-party countries are being used, Indian traders are also settling some of the trade payments outside Russia.
Since there is no ban on transacting with other countries on payments through the Society for Worldwide Interbank Financial Transactions (SWIFT), payments are being made to third countries, including China, for re-routing it for their trade with Russia which is under sanctions from the West and its allies.
Meanwhile, in FY24, India’s exports may hit the USD 900 billion mark (USD 770 billion in FY23) despite global headwinds. This includes merchandise exports of USD 500 billion and services exports to the tune of USD 400 billion by March 2024 as overseas demand remained strong, said Ajay Sahai, Director-General of the Federation of Indian Export Organizations (FIEO).
Prime Minister Narendra Modi’s government has set an export target of USD 2 trillion by 2030, offering benefits to boost exports of electronics, engineering, pharmaceutical, and other goods.
India’s exports have increased by over USD 200 billion in the last two years, led by a surge in software, mobile exports, and agricultural and petroleum products exports. However, exports of engineering, gems, and jewelry goods slowed in the last few months.
Exports of agricultural, petroleum, and electronic goods remained strong in the Western markets due to pricing factors while exports to Asian and Middle East countries have grown substantially, exporters said.
Sahai, who was part of a 50-member business delegation to Russia last week, said there was a huge demand for Indian goods, particularly food, after the Western sanctions imposed over the Ukraine war.
