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Informist, Wednesday, Aug 14, 2024

 

NEW DELHI – India and Russia are exploring the possibility of enabling a dynamic rupee-rouble exchange rate for smooth settlement of trade between the two nations in their respective local currencies, a senior commerce ministry official said. The two sides had agreed to settle trade using rupee and rouble in 2022.

 

"Normally, barring euro and dollar, any other exchange mechanism is via a referencing mechanism which is either a dollar or euro," the official said. "If we have a direct exchange rate, we do not have to peg it to any currency, including dollar."  

 

Currently, the banks managing the rupee-rouble trade payment take the dollar route to convert the currencies. So they carry out two simultaneous transactions--rupee to US dollar and dollars to rouble--to arrive at a rupee-rouble exchange rate.

 

For a dynamic exchange rate, rupee and rouble must trade in the same currency exchange platform for a long duration, the official said. "There are a lot of international currency exchange platform that do this trading. The central banks on both sides will have to work out the modalities of identifying the exchange rate."

 

The rupee-rouble trade settlement mechanism had also hit a hurdle after Russian exporters accumulated large amount of rupee in their vostro accounts with Indian banks. Indian importers had paid for some non-oil trade in the rupee.

 

"That rupee is more or less exhausted. Some of it have been set off against our exports, and some gold imports happened via advanced authorisation mechanism," the official said. "Some have been set off via repatriation of currencies, so I don't think much (rupee balance) is lying, only a few millions."

 

India's trade with Russia has risen significantly since 2022 after New Delhi started importing crude oil from Russia at a discounted price in the aftermath of the Ukraine war. India's import of crude oil from Russia jumped to over $40 bln in 2022-23 (Apr-Mar) from about $6.38 a year ago. In the last fiscal year, the total trade between the two countries was $65.69 bln, which included imports worth $61.43 bln.

 

Efforts to boost bilateral trade with Russia have gained momentum after Prime Minister Narendra Modi visited Moscow in July. During the visit, he had held two meetings with Russian President Vladimir Putin and both the leaders set a bilateral trade target of $100 bln by 2030.  End

 

US$1 = 83.95 rupees

 

Reported by Krity Ambey and Sagar Sen

Edited by Akul Nishant Akhoury

 

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