India and Russia have doubled rupee-rouble payments in 2024
Context:
Despite Western sanctions, India and Russia have significantly increased their use of national currencies (rupee-rouble) for bilateral trade. This shift, facilitated by Russia’s largest bank, Sberbank, is seen as a strategic move to counter China’s growing influence in the Russian market.
- The recent visit of Prime Minister Narendra Modi to Moscow is expected to further enhance economic cooperation between the two nations.
Relevance:
GS-03 (Economy)
Key Highlights:
- Increased Rupee-Rouble Transactions: India and Russia have doubled their payments in national currencies since last year, with Sberbank reporting an 80% increase in the number of transactions in the first half of 2024 compared to the same period in 2023.
- Surge in Rupee Deposits: Rupee deposits by Indian corporates in Russia have increased sixfold in 2024. This reflects a growing trust in the rupee among Russian clients and businesses.
- Impact of Western Sanctions: Despite U.S. and EU sanctions imposed after Russia’s invasion of Ukraine in 2022, Sberbank continues to facilitate a significant volume of payments for Indian exports to Russia.
- Strategic Importance of Modi’s Moscow Visit: Prime Minister Narendra Modi’s visit to Moscow has been pivotal in elevating economic cooperation. The goal is to achieve a $100 billion trade target by 2030, as agreed upon by Mr. Modi and Russian President Vladimir Putin.
- China’s Advantage and Opportunity for India: Chinese businesses have capitalized on the sanctions to fill the void left by Western companies, achieving a balanced bilateral trade of $240 billion with Russia. Indian businessmen urge the government to act quickly to prevent further Chinese dominance and promote Indian exports in sectors like auto components, chemicals, and electronics.
- Future Prospects: Experts emphasize the need for secure payment mechanisms, insurance, and logistics to support increased trade. Indian companies are encouraged to explore opportunities in the Russian market to address the demand for diverse products and reduce reliance on the Chinese yuan for transactions.
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