Team Blitz India
NEW DELHI: 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, two Indian government officials and a source with direct knowledge of the matter said.
This would be a major setback for Indian importers of cheap oil and coal from Russia who were awaiting a permanent rupee payment mechanism to help lower currency conversion costs, national dailies reported on May 5.
With a high trade gap in favour of Russia, Moscow believes it will end up with an annual rupee surplus of over $40 billion if such a mechanism is worked out and feels rupee accumulation is ‘not desirable’.
The Union finance ministry, the Reserve Bank of India and Russian authorities, however, did not immediately respond to requests for comment.
The rupee is not fully convertible. India’s share of global exports of goods also is just about 2% and these factors reduce the necessity for other countries to hold rupees.
India started exploring a rupee settlement mechanism with Russia soon the invasion of Ukraine in February last year, but there has been no reported deal done in rupees. Most trade is in dollars but an increasing amount is being carried out in other currencies like the UAE dirham.
