India-Russia Bilateral trade in Rupee - Talks Suspended?

Potential reasons why trade may not happen in Rupee.

Important topic for Lecturette and Defence Exam 

Talks suspended?

India and Russia have been engaged in talks for a rupee trade settlement mechanism for over a year. India and Russia are strategic partners since years and Russia considers India to be one of the most important business and export ally.  

Total Trade between India and Russia in 2020-21

• Total: $10.11 billion
• Indian export to Russia: $2.42 billion
• Indian import from Russia: $7.69 billion

Total Trade between India and Russia from 2017-21

Bar Chart for India-Russia Trade

Almost 80% of the trade is IMPORT FROM RUSSIA TO INDIA.  

India is acutely dependent on Russia for a range of weaponry. In fact, 60% to 70% of India’s conventional military equipment is of either Soviet or Russian origin. However, since 2015, India has shown interest to western countries and has bought multiple defence vehicles, aircrafts and choppers which includes Rafale, Chinook Helicopter, etc.. 

According to Reuters, from January to August 2022, the trade turnover between Russia and India increased by 130%, reaching US$17 billion. At the same time, the export of Indian goods to Russia decreased to US$992.7 million. 

According to Western Media, India and Russia have suspended efforts to settle bilateral trade in rupees after months of negotiations failed to convince Moscow to keep rupees in its coffers. The main reason for the same is that INDIA IMPORTS MORE THAN WHAT IT EXPORTS TO RUSSIA. Hence, Russia would be left with Rupee currency which may not be used anywhere without converting them to other form of currency.

In the SCO summit in Goa on 5th May 2023, Russian Foreign Minister Sergey Lavrov stated that Russia has accumulated billion of rupees in Indian bank accounts but to use this money it needs to be transferred to another currency and this is being discussed. 

Presently, neither Indian nor Russian ministry has informed about the suspension of talks for trade in Rupee. Russian ministry has completely denied to the Western Media claims.

Presently, there is very less scope of trade in Rupee and Russia would always prefer that the trade stays in Chinese currency Yuan due to Russia's huge dependence on Chinese import via land and sea routes.