FICCI moots strategies to double Indo-Russian trade

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To help Indo-Russian trade to double in the next five years from $2.72 billion recorded in 2005-06, the Federation of Indian Chambers of Commerce and Industry has suggested a three-pronged strategy.

First, an institutional mechanism must be established to sort out financing problems faced by exporters. Second, use the unutilised money in the rupee-rouble debt agreement to fund investments in India and leverage it to attract greater Russian participation. Last, facilitate greater interface between Russian and Indian companies to facilitate flow of information on business opportunities available in the two countries.

The sectors where India can attract investments from Russia include steel, aluminium, real estate, pharmaceuticals, power, metro projects in different cities and ports. Likewise, the sectors that look promising for investments in Russia include pharmaceuticals, tea and tobacco, says FICCI.

Negotiation nuances

According to feedback received by the chamber from companies doing business with Russia, the payment system involving the letter of credit is ineffectual in business dealings with the country. Indian exporters say that in the absence of letters of credit, they have to negotiate with their counterparts directly.

In such cases, Russian importers are asked to make an advance payment upfront, with the remaining amount being paid after the execution of the export order.

In the past, Indian exporters have faced problems in receiving balance payments from their Russian counterparts. The chamber has, therefore, suggested that the Government encourage Indian banks to negotiate with Russian banks to develop a coherent system involving letter of credit.

Companies have also pointed out that there is strong control exercised by Russian banks over currency transactions. Greater transparency in handling such transactions and free flow of foreign exchange would enhance investor confidence, according to the apex chamber.

Taken from Business Line

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