Desk Report
Publish: 31 Mar 2022, 12:36 pm
Fuel prices have shot up as the war in Ukraine has dragged on || Photo: Bloomberg
Indian authorities are actively
considering dedicated payment mechanisms for trade with Russia to enable
existing trade obligations in the wake of sanctions imposed on the Kremlin, a
move that will also pave the way for cheaper oil imports to meet the country’s
energy demands.
In the past month, as sanctions
have been imposed on Russia, the scope of a payment mechanism in local
currencies has expanded from being a means to sustain ongoing trade to
possibilities of deeper engagement, including increasing bilateral trade.
For the rupee-rouble mechanism to
be implemented, Indian importers would pay for goods to the accounts of Russian
banks in India and they in turn would make the payment in roubles to the
Russian exporters. But since India’s imports outweigh its exports, the only way
the Russian banks can get rid of their piled up rupees is if India exports
more, experts say, opening up an opportunity for manufacturers of agricultural
machinery, medicine, furniture, and bathroom fittings, among other goods, who
are looking for new markets.
“We need to be aware of where
Russia would want to look at import substitution,” said Nandan Unnikrishnan,
distinguished fellow at the Observer Research Foundation (ORF). Some of those
exports will come from India’s medium and small industries who can also look at
setting up units in Russia, he added. “They don’t have a lot of experience with
SMEs [Small Medium Enterprises] and we have a huge amount of experience there
that we could share practically and on the ground.”
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