Russians were offered to bet on rupees: what’s the catch?

Experts spoke about the risks of investing in Indian currency

Indian Rupees are a reliable storage and investment instrument. Their accumulation by Russian companies not only does not create problems, but also expands existing financial opportunities. This was stated by Deputy Minister of Foreign Affairs of the Russian Federation Andrei Rudenko. He added that the Indian currency is increasingly used in international payments and is convenient for investment in the economy of India and its regional trading partners. Does such a high valuation mean that it’s time for ordinary Russians to think about keeping their savings in rupees?

According to Rudenko, the rupee exchange rate is quite stable and is not subject to speculative manipulation, which cannot be said about the US dollar or euro. The Deputy Foreign Minister of the Russian Federation admitted that the Indian currency has relatively low convertibility, but he is confident that this should not become a problem, because the Indian authorities are taking active steps to internationalize the rupee in trade with other countries. The diplomat is confident that the influence and share of this currency in international trade will only increase. Rudenko believes that areas for investing the proceeds of Russian companies will only expand.

The Russian Deputy Foreign Minister started talking about the situation with Indian rupees for a reason. Let us recall that at the end of last summer, Russian companies had problems with revenue in Indian currency. “Russia supplied $30 billion worth of oil and petroleum products to India in the first half of the year, and our imports from India are estimated at about $6–7 billion a year,” former Russian Finance Minister and now a major banker Mikhail Zadornov said in an August 29 article. “We have nothing to buy in India, but we cannot return these rupees, since the rupee is an inconvertible currency. $30 billion in six months is more than the entire current account surplus.” According to the financier, it was the “frozen” rupees that were one of the main problems with the ruble exchange rate, which in late summer and early autumn began to rapidly weaken against the dollar.

However, judging by Rudenko’s statement, the problems identified by the ex-minister of finance no longer worry Russian exporters and the economy. True, the experts interviewed by MK argued about the validity of this conclusion. “Taking into account that investments and settlements are actually closed for Russian companies in dollars, euros and pounds, all strong regional currencies that remain independent are interesting for the Russian economy,” Artem Tuzov, director of the corporate finance department at IVA Partners, supported the position of the Deputy Minister of Foreign Affairs of the Russian Federation. — First of all, these are, of course, the yuan and the rupee. India and China are now among the most promising countries in terms of economic potential, which is why the role of their national currencies is growing in international trade.” And investments in the Indian economy through rupees are promising, however, only if we talk about the state level. For the personal wallet of Russians, rupees are still difficult to acquire both for investment and for savings, Tuzov admitted.

The Indian Rupee is not a freely convertible currency, it is partially convertible. “Due to this circumstance, as well as due to restrictions on the movement of capital, it is of little use for international settlements (other than settlements with India itself) and for the creation of international reserves,” Maxim Osadchiy, head of the analytical department of BKF Bank, enters into an absentee dispute. — There are no rupees in the National Welfare Fund. Holding cash rupees is extremely dangerous, as India regularly withdraws individual issues of rupees from circulation. Thus, in 2016, the 500 and 1000 rupees banknotes of the Mahatma Gandhi series were “demonetized.” In 2023, 2000 rupees banknotes were withdrawn from circulation; from October 1, 2023, they lost their solvency.”

Due to the fact that India imports a lot of oil and other goods from Russia during the NEA period, while its exports to Russia are small, India has a huge trade deficit with Russia. During April-November 2023, Russia exported goods worth $40.5 billion to India, but imported goods worth only $2.7 billion from India. As a result, India had a trade deficit with Russia of $37.7 billion. Russian exporters Large volumes of illiquid rupees are stuck. “In order to somehow solve this problem, supplies of bananas from Ecuador, which had been at fault, were replaced by supplies of bananas from India,” the analyst said. — Ecuador supplied Soviet weapons to the United States, and then they went to Ukraine. Quite independently of this circumstance, a “hunchback fly” suddenly appeared in Ecuadorian bananas, detected by the vigilant Rospotrebnadzor. Let’s hope that this dangerous fly does not infest Indian bananas.” As for the use of rupees as a replacement for dollars and euros in the wallets of Russians, there are even fewer prospects. According to our interlocutor, only one bank in St. Petersburg has launched a time deposit in Indian rupees since April 2023, but now this bank does not offer savings in rupees to individuals. At present, it has not been possible to find any Russian bank offering citizens time deposits in Indian rupees, so this tropical exotic has not taken root in the Russian market, the expert concludes.

“Although India is the fastest growing major economy, with growth rates expected at 6% in fiscal years 2023 and 2024, the Indian rupee as a currency is very volatile in relation to major world currencies,” Oksana Stepannikova, associate professor at the Faculty of Economics at RUDN, continues the conversation. . Its strengthening continues to be hampered by major economic problems, including dependence on imported oil (80% of oil is imported). In July 2022, India’s central bank introduced a facility for international trade settlements in Indian rupees. This measure allows parties to invoice, pay and settle imports and exports using the rupee, which will further the long-term goal of internationalizing Indian currency. However, from a short-term perspective, purchasing the Indian rupee is a premature decision due to existing restrictions, the economist is sure.