Chart of the Day: The rupee-rouble trade is growing

The Reserve Bank of India (RBI) has allowed settlement of global trade to be done in Indian rupees which is expected to reduce the need for dollars. To start with, this measure is seen as boosting trade with Russia, which has increased sharply ever since Russia and Ukraine went to war.

India’s imports from Russia outstrip exports and the trade deficit with the country has increased over the past two years. As of March, the trade deficit has more than doubled.

Imports from Russia are dominated by petroleum products and fertilisers, two key commodities currently causing pain to India due to a spike in prices. That said, oil imports from Russia work out cheaper through a bilateral arrangement which explains the sharp rise in them.

Further, the move to allow trade settlement in rupees is expected to further boost trade with Russia as such transactions can bypass the sanctions imposed on the country. The need for US dollars too reduces for both the countries involved.