not been heeded, it stopped short of criticising Russia, and has even decided to purchase crude oil from the transcontinental nation at a discounted rate. As the sanctions imposed by Western super powers came into effect this week, Indian authorities are actively exploring a rupee-rouble payment scheme to bypass war.
At the moment, Indian banks are able to carry out dollar-denominated trade and receive or settle payments in the US dollar with Russian banks which are outside the sanction list. However, many are concerned that such transactions would be disrupted if the West decides to extend the sanction to cover more Russian banks. Accordingly, Delhi is actively considering dedicated payment mechanisms for its bilateral trade with Russia in order to enable existing trade obligations, while the move is also expected to pave the way for cheaper oil imports to the South Asian nation to meet its rising energy demands.
Currently, India’s trade with Russia is largely tilted towards imports, with Indian exports amounting to $2.6 billion, while imports from Russia stood at $5.48 billion during the financial year April 2020 through March 2021. This bias is expected to remain or even tilt more in the direction of imports, unless India ramps up exports to the transcontinental nation, which would have a positive impact on the substantial trade deficit of the South Asian nation.
However, experts say that Indian banks are averse to backing trade with Moscow, even on goods which are not subject to sanctions. Accordingly, the Federation of Indian Export Organisations (FIEO) has submitted a proposal to India’s Ministry of Commerce to overcome these challenges. In its proposal, the Organisation has suggested a rupee-rouble mechanism as well as a rupee-based trade mechanism, under which the contract is made in the rupee, while the other party bears the exchange rate risk.
