Turnover of rubles and rupees with reservations – Kommersant

Trade turnover between the Russian Federation and India could reach $100 billion by 2030, half of the current one with China, analysts at the Russian-Asian Business Council (RABC) suggest. According to their estimates, Russian exports to India could grow from $32.5 billion in 2022 to $72–95 billion in 2030, imports over the same period – from $2.5 billion to more than $20 billion. Export growth will be largely provided with energy resources, imports – expansion of imports of pharmaceutical and chemical products. However, to increase trade, countries will have to solve existing problems – from logistics restrictions to difficulties with financial settlements.

The export of Russian products to India, which was insignificant before the start of the Russian military operation in Ukraine, will only increase in the coming years due to the sanctions-induced reorientation of supplies “to the east”, predicts RADS (an independent non-profit organization specializing in consulting on business relations with Asian countries). The trend is recorded in the new report of the organization “Russian-Indian Trade and Economic Relations”. According to analysts, in monetary terms, supplies of Russian goods to India could increase by approximately 2.5 times, from $32.5 billion in 2022 to $72–95 billion in 2030.

The main contribution to the expansion of exports will be made by energy resources (see chart). Let us explain, since February 2022, India has become one of the largest buyers of Russian oil and coal. The demand for them in the country will grow in the coming years, which is confirmed, for example, by IEA analysts (see Kommersant on December 20). Other categories of goods that could provide increased exports include fertilizers, machinery and equipment, wood products, and ferrous and non-ferrous metals.

Russian imports from India will grow from $2.5 billion in 2022 to more than $20 billion in 2030. It is expected that in the coming years, Indian pharmaceutical companies, suppliers of chemical industry products (inorganic chemical products, paints, varnishes, essential oils and nucleic acids), as well as seafood, will expand their presence on the Russian market.

In bilateral trade, Russian exports have always exceeded Indian ones, but now analysts are recording a particularly noticeable increase in the trade imbalance in favor of Russia. Part of what is happening can be explained by the departure of some large Indian companies from the Russian market, fearing to fall under secondary sanctions. As noted in RADS, the trade imbalance with a strong bias towards the Russian Federation also explains the refusal of the parties to actively use rupee in settlements.

Let us recall that for settlements in national currencies, large Russian banks have opened “vostro” accounts in India, through which transactions in rupees can be carried out in the country and converted into rubles. At the same time, the flow of rubles to authorized Indian banks can only be ensured by local exporters, whose funds, as can be seen from the volume of supplies, are less than necessary (see Kommersant on April 27). RADS notes that “against the backdrop of an increase in the volume of rupees in the accounts of leading Russian financial and energy companies,” no growth in Russian investments in India is currently being recorded.

The Russian Federation cannot make payments for supplies in dollars (due to sanctions restrictions); India does not want to pay in yuan (due to tense relations with China). Analysts note that the expansion of imports of goods from India, which, according to their estimates, rests, among other things, on problems with logistics, could help solve the problem with payments (more active use of the rupee in them). We are talking, for example, about the not yet completed section of the North-South corridor – the railway from the Iranian Rasht to the Azerbaijani Astara, the launch of which should speed up and reduce the cost of cargo transportation. Let us remind you that the site is expected to be completed by 2025. RADS sees another problem that could hinder the expansion of bilateral trade in the lack of awareness of Russian business about the Indian market – and vice versa.

Kristina Borovikova