Economy

India’s trade ministry acts to cut ballooning trade.

India’s trade ministry acts to cut ballooning trade deficit with Russia, reaches out to EPCs: Sources

In recent times, discounted crude oil has played a significant role in India’s imports. OPEC used to account for as much as 90% of the crude oil India imported, but this figure has been declining since Russian oil became available at a lower price after Moscow’s invasion of Ukraine in February last year. To address India’s burgeoning trade deficit with Russia, the commerce ministry is requesting that all Export Promotion Councils (EPCs) identify possible products India can sell to Russia to boost its own exports.

According to government data, India’s trade deficit with Russia amounted to $34.79 billion between April 2022 and January 2023, mainly due to India’s acquisition of Russian crude oil. Russia, which was India’s 25th biggest trading partner in FY22, has risen to second place, behind only China.

“We are striving to achieve a balanced trade association with Russia, and to do that, we need to increase our exports. India is planning to promote textile and agricultural product exports to Russia. All Export Promotion Councils have been informed to discover the possibilities of exporting India’s goods,” a senior government official told Moneycontrol.

India’s merchandise imports from Russia increased by 369 percent to $46.3 billion in 2022-23, with almost two-thirds of these imports comprising crude oil as India diversified from more costly Middle Eastern crude following the Russian invasion of Ukraine. By contrast, in 2021-22, India imported just $9.86 billion worth of goods from Russia. In just one year, Russia rose from being India’s 18th largest import source in 2021-22 to becoming the fourth largest.

The official stated that Export Promotion Councils have been instructed to analyze potential opportunities and comprehend which items are required to be traded to Russia.

In the previous month, delegations from Export Promotion Councils visited Russia to learn about Indian goods that have the potential for export to Russia.

A trade settlement mechanism in rupee was introduced to facilitate trade between the two nations after sanctions were imposed on Russian banks using the international SWIFT messaging system for selling payments. On July 11, 2022, the Reserve Bank of India allowed invoicing and payments for global trade in Indian currency.

Although India is encouraging rupee trade with Russia to boost exports, exporters are free to trade in whatever currency suits them best, according to the official cited above.

“Rupee trade is ongoing. We are promoting rupee trade with Russia. However, exporters should trade in a currency that is convenient for them,” he stated.

At the Shanghai Cooperation Organization (SCO) meetings, Russian Foreign Minister Sergei Lavrov informed reporters that his country had amassed billions of rupees in Indian banks due to its increasing trade surplus, which is an issue.

“We must utilize this money. However, for this to happen, these rupees must be converted into another currency, and this is currently being discussed,” he said.

Although Russia has continued to be the largest supplier of crude oil, accounting for over one-third of all oil imported by India, its share of India’s imports increased from less than 1% before the start of the Russia-Ukraine conflict in February 2022 to 36% in April, when it supplied 1.67 million barrels of oil per day, according to market analysts at energy cargo tracker Vortexa. In March 2022, India imported only 68,600 barrels per day of oil from Russia, whereas this year, purchases have jumped to 1,678,000 bpd.

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