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The Exchange Rate

Denis Manturov, the Russian Deputy Prime Minister and Minister for Trade and Industry, was heard mentioning that having a Rupee-Ruble System was not being sufficient for trade between India and Russia since the South Asian nation failed to overcome the lack of supply. During his two-day trip to New Delhi in mid-April 2023, the visiting minister said that the Kremlin would increase the volume of trade with New Delhi before balancing the Rupee-Ruble System. Manturov admitted that the two friendly nations would have to address issues, related to prices of trade items, first.

According to diplomatic sources, India started facing problems in purchasing defence equipment from Russia after the US imposed economic sanctions on Moscow. Manturov discussed the issue with Indian Minister of External Affairs Dr Subrahmanyam Jaishankar during his stay in New Delhi. Although India continues to import defence equipment from Russia, the two countries are trying to find ways to increase trade targets by avoiding Dollar-restrictions.

The global community isolated Moscow after Russia launched the war against neighbouring Ukraine on February 24, 2022. However, India has strengthened trade ties with Russia in recent times, ignoring the US sanctions. Moscow, too, exported record amounts of crude oil to New Delhi in the past one year. The Narendra Modi Administration in New Delhi has defended its decision to boost trade ties with the Kremlin by highlighting India’s huge demand in the field of energy at various international forums. However, the two nations are facing problems in trading defence equipment and arms because of the Dollar-related restrictions (imposed on Russia). As New Delhi has failed to import batteries of two TS 400 missiles and other defence accessories from Moscow, both the parties are trying to find out how India can pay the huge amount by avoiding transactions in US Dollars.

The problem is that Russia does not want to accept Indian Rupees because of the fluctuations in its exchange rate. India, too, is not willing to trade in Ruble. India has offered to invest the money received in exchange of arms in the domestic market. However, the Modi Government is yet to make a final decision in this regard.

The Indian Ministry of External Affairs has claimed that it is a temporary problem, as the two countries are trying to resolve the issue diplomatically. New Delhi believes that the diplomatic solution would ultimately boost bilateral trade ties. After holding talks with the visiting Russian minister, Dr Jaishankar admitted that there were legitimate concerns about the India-Russia trade deficit. At the same time, he said that senior officials of the two countries would take necessary steps to reduce it. The Indian Minister of External Affairs stressed that the Indian and Russian officials had a clear understanding of the short-term and medium-term challenges.

Meanwhile, Manturov claimed that Russia would boost trade ties with India through the 7,200km-long Multimodal Corridor (International North-South Transport Corridor; from India to Syria) in the coming days. He told the Indian media that Moscow decided to use the Iranian ports and railways, apart from urging West Asian nations to invest in this project. According to the Russian minister, all the partner countries would enjoy benefits from the Multimodal Corridor.

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