How India and Russia have doubled their payments in national currencies despite Western sanctions

Source: The post how India and Russia have doubled their payments in national currencies despite Western sanctions has been created, based on the article “India and Russia have doubled rupee-rouble payments in 2024” published in “The Hindu” on 16th July 2024

UPSC Syllabus Topic: GS Paper2-International Relation- Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

Context: The article discusses how India and Russia have doubled their payments in national currencies despite Western sanctions. Rupee deposits by Indian companies in Russia have increased significantly. Economists believe that India’s trade with Russia could grow further following Prime Minister Modi’s recent visit to Moscow.

For detailed information on India-Russia Relations read this article here

What is the Current State of India-Russia Trade Payments?

1. Increase in Payments: India and Russia have doubled their trade payments in national currencies (rupee and rouble) despite Western sanctions.
2. Sberbank’s Role: Sberbank, Russia’s largest bank, reports a doubling in payment volume and an 80% increase in transactions from January to June 2024 compared to the same period in 2023.
3. Rupee Deposits: There has been a sixfold increase in corporate rupee deposits in Russia in 2024.

What Are the Challenges and Opportunities for India in Russia?

1. Challenges:
2. Competition with China: Chinese businesses have taken advantage of the sanctions to dominate the Russian market. China has bilateral trade with Russia worth $240 billion, significantly higher than India’s trade volume.
3. Currency Competition: Indian businesses are sometimes forced to consider using the Chinese yuan, which indicates a challenge in promoting the rupee exclusively.
4. Opportunities:
5. Increase in Rupee Usage: The sixfold increase in corporate rupee deposits in Russia since the start of 2024 shows growing trust in the Indian currency.
6. Prime Minister’s Visit Impact: Prime Minister Modi’s recent visit to Moscow is described as crucial for advancing to a new level of economic cooperation

3.Market Vacuum: The exit of Western companies from Russia creates opportunities for Indian products to fill the market gaps.

What Impact Did Prime Minister Modi’s Visit to Moscow Have?

1. Strengthened Economic Ties: The visit marked a new level of economic cooperation between India and Russia.
2. Future Trade Goals: Both leaders set a trade target of $100 billion by 2030, emphasizing the potential growth in bilateral trade.
3. Sectoral Focus: Key sectors for increased Indian exports include auto and aviation components, chemicals, microelectronics, and consumer electronics.

Question for practice:

Discuss the impact of Prime Minister Modi’s recent visit to Moscow on India-Russia economic relations and the potential for achieving their trade target of $100 billion by 2030.