Local currency settlements will significantly benefit businesses trading with Moscow, Ajay Sahai told RT
New Delhi can significantly increase exports to Russia and reduce the existing trade deficit by using payment mechanisms in local currencies, the head of the Federation of Indian Export Organisations (FIEO) has told RT. Ajay Sahai, the director general and CEO of the body, predicted that bilateral trade could reach $65 billion in 2024, after exceeding an unprecedented $50 billion last year.
Imports from Russia are expected to account for just over $60 billion of the total figure, while exports from India are likely to exceed $4.5 billion. Last year, India exported $4 billion worth of goods to Russia, largely driven by engineering products, according to data from the Indian Commerce Ministry. The trade deficit has been widening largely due to imports of discounted Russian oil by India amid Western sanctions imposed on Moscow.
“The good thing is that many of the Indian companies are looking to Russia in a big way. A lot of small and medium companies have also shown interest in their trade with Russia,” Sahai said.
With many Western companies moving out of Russia, he added, there is a significant opportunity for India to further increase its exports to the country. Despite intense scrutiny from the West, bilateral trade has witnessed massive growth in new areas such as iron, machinery, electronics, chemicals, ceramics, and agriculture, Sahai noted.
Referring to the payments mechanism used by the two countries, he said it takes “a little time” for any new system to be put into place and utilized, but much of the trade between India and Russia will be in local currencies “in time to come.” “The advantage of local currency is that you are sure of how much you will be getting as a part of export proceeds and you do your costing based on the local currency; there is no fluctuation in that,” he added.
New Delhi and Moscow implemented a mechanism to facilitate bilateral trade in local currencies after Russia was cut off from the SWIFT international payment system. As trade witnessed a sharp rise, Moscow has reportedly accumulated a surplus of more than $40 billion in special vostro accounts in Indian banks in the local currency. Russian officials have repeatedly called for greater commitment from Indian financial institutions to adopting rupee-ruble payment mechanisms on a larger scale to facilitate growing transactions.
“The moment we allow the Russian companies to liquidate the rupee balance which is lying in India, probably they will be more interested to supply to India also in rupee and we will be, therefore, exporting more in rupee which will help in significant internationalization of rupee also over a period of time,” said Sahai.
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He made the comments against a backdrop of the Indian government pressing ahead with plans to make the Indian rupee a more widely accepted currency for international trade and investment.
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