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India's trade deficit with Russia rises a whopping 674% in H1 on discounted oil buys

The trade deficit with Russia stood at $20.05 billion at the end of September and is now second to the $44.54 billion deficit with China.

November 10, 2022 / 02:21 PM IST
Representative image

Representative image

India’s merchandise trade deficit with Russia jumped 674 percent in the first half of this fiscal as it bought unprecedented volumes of discounted crude petroleum from the country under heavy Western sanctions in the past few months. The size of the trade deficit with Russia is now only second to that with China, trade data published by the Commerce ministry shows.

India’s trade deficit with Russia at the end of September was $20.05 billion compared to $2.59 billion in the corresponding period of the last fiscal year. The trade deficit with China stood at $44.54 billion. India imported merchandise, mainly sea-borne petroleum crude, worth $21.35 billion in the first half from Russia and exported goods worth $1.30 billion.

Also Read: India, Russia have exceptionally steady and time-tested relationship: S Jaishankar in Moscow

Such a large trade deficit renders trade in the domestic currencies, the rupee and rouble, unviable. The two nations are, however, continuing talks for a rupee-rouble settlement. For the moment, India is reported to be settling its bills in dollars, although Russia had stated a preference for euros and the UAE dirhams.

Trade deficit with Russia may rise

India’s trade deficit with Russia may climb higher, given its intention to continue buying cheaper petroleum crude in large quantities. The US has also signalled that it does not have objections to India sourcing oil from Russia as long as the contracted rate was within the price cap proposed by the West. Ahead of her India visit, US Treasury secretary Janet Yellen said she hoped India would benefit from the price cap.

External affairs minister S Jaishankar, during his visit to Russia this week, reiterated that buying Russian oil was to India’s advantage and that the country would continue to do so. He added the government had a fundamental obligation to ensure that Indian consumers have access to international markets on the most advantageous terms.

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Petroleum and natural gas minister Hardeep Puri had made similar statements recently. Russia had emerged as India’s largest supplier of oil in October, surpassing Iraq, independent research firms Vortexa and Kpler said recently. The government data on October imports is yet to be published.

The trade deficit widened as Indian refiners, mostly the private sector ones, imported petroleum crude worth $14.07 billion between April and September 2022. Imports of petroleum products also rose to $1.52 billion. Overall, India’s imports from Russia jumped 410 percent in the first half of the current fiscal year to $21.35 billion.

Other than petroleum crude and products, India also imported coal and fertilisers from Russia. Coal imports grew 300 percent and fertiliser 760 percent by value in the first half of the fiscal. Other imports include precious stones such as diamonds. India’s $1.30 billion worth of exports to Russia included pharmaceutical products, organic chemicals and machinery.

Tina Edwin is a senior financial journalist based in New Delhi.