India and Russia have doubled rupee-rouble payments in 2024

India and Russia have doubled their payments in national currencies (rupee-rouble) since last year despite sanctions by the U.S. and European Union, says Russia’s state-controlled and largest bank, Sberbank, which handles a majority of payments for Indian exports to Russia.

Key Highlights

• Increase in Transactions: According to Sberbank, the volume of payments processed from January to June 2024 doubled compared to the same period in 2023. The number of transactions increased by 80% in the first half of 2024.
• Rupee Deposits: Indian corporates' rupee deposits have increased sixfold in 2024, reflecting growing trust in the rupee.
• Economic Cooperation: The surge in rupee-rouble transactions is expected to rise further after Prime Minister Narendra Modi’s visit to Moscow, which aimed to strengthen economic cooperation between the two nations.

Reasons Behind the Surge

• Sanctions and Opportunities: The sanctions imposed on Russia by the U.S. and the EU have created opportunities for Indian businesses. The exit of Western companies from the Russian market has left a vacuum that Indian businesses can fill.
• Enhanced Trust in Rupee: Sberbank reported an increase in trust towards the rupee among its clients, with rupee-denominated accounts and deposits becoming more prevalent.
• Strategic Visits and Agreements: Prime Minister Modi's visit to Moscow and the $100 billion trade target set for 2030 with Russian President Vladimir Putin have boosted confidence in bilateral trade.

Impact of the Increased Payments

• Trade Balance and Growth: The doubling of rupee-rouble payments is expected to contribute to a more balanced and substantial trade relationship between India and Russia.
• Sectoral Opportunities: Sectors such as auto and aviation components, chemicals, microelectronics, consumer electronics, machinery, medical devices, and agricultural products are highlighted as potential areas for Indian exports to Russia.
• Competitive Edge: Indian businesses have the potential to gain a competitive edge in the Russian market, which is currently being dominated by Chinese products.

Required Measures

• Government Support: The Indian government must provide robust support to businesses venturing into the Russian market, including secure payment mechanisms, insurance, and logistics.
• Filling Market Vacuums: Indian businesses should capitalize on the opportunities created by sanctions and fill the market vacuums with Indian products.
• Strategic Alliances: Strengthening strategic alliances and enhancing cooperation in key sectors will be crucial for achieving the trade targets and sustaining growth.

Mains Practice Question

Q: Discuss the significance of rupee-rouble payments in enhancing India-Russia trade relations in the context of current geopolitical challenges.