Indian exporters see room to sell more goods to Russia by accepting payments in rupees as the South Asian nation looks to diversify exports amid 50 percent tariffs, among the highest in the world, imposed by the United States, a source said.
“India can sell more goods to Russia on a rupee trade basis. Engineering goods exports are already happening in rupees for over a year, this can be further increased and expanded to more products,” the source said.
A more attractive mechanism for rupee trade is key to enhancing exports to Russia, as sanctions limit transactions in US dollar, the source added. This at a time when Indian exporters are looking for alternate destinations for their goods due to steep American tariffs .
The two nations pledged to take bilateral trade over $100 billion by 2030 during Prime Minister Narendra Modi's visit to Moscow in July 2024.
Last year, they were also in talks to establish a direct exchange rate for their local currencies to boost trade. The idea involves avoiding pegging the exchange rate with the dollar or any other third currency.
Total trade between India and Russia was worth $68.8 billion FY25, up 4.7 percent on-year and with the deficit widening in Moscow’s favour to $59 billion thanks New Delhi’s crude oil purchases.
The source added that given the accumulation of rupee by Russian firm in Indian bank accounts, “whatever we sell to them we can get paid in rupees”.
The accumulation was caused by an increase in New Delhi’s purchase of Russian oil in 2022, increasing from a mere 0.2 percent, to around 35-40 percent.
In September 2023, Russia's foreign minister Sergei Lavrov reiterated that Moscow has billions of rupees stored in Indian banks that "unfortunately cannot be used right now" but India had proposed some ways in which this money could be invested.
The increase in the purchase of Russian oil with New Delhi having little to offer in terms of exports, has led to a widening trade gap and rendered trading in local currencies difficult.
Moneycontrol reported earlier that Indian oil refiners were largely banking on dirhams to make payments for Russian oil instead of any other currency, including the rupee.
India started exploring a rupee settlement mechanism with Russia soon after the invasion of Ukraine in February 2022 but this practice failed to pick up due to the skewed trade balance between the two sides.
US President Donald Trump has often accused BRICS group of nations, of which both India and Russia are a part, of undermining the dollar and has threatened punitive action.
Of the 50 percent tariffs he has slapped on India, 25 percent is “penalty” for buying Russian oil.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
