Rupee payment agreement doubles value of India's engineering exports to Russia

Export market: India's annual export of machinery, auto parts and other engineering goods to Russia more than doubled to over $1 billion in nine months through December as Moscow is settling trade in rupees, a top exporters' group official said.

Russia has signed deals with many countries including China, Iran and India to trade in local currencies, instead of the US dollar, after the West imposed sanctions on Moscow following its full-scale invasion of Ukraine in February 2022. 

"Our engineering goods exports to Russia are booming," said Arun Garodia, Chairman of the Engineering Export Promotion Council of India (EEPC), after the launch of a payment mechanism to settle trade in national currencies.

Indian exporters and government officials said at a separate event on Tuesday there were strict national guidelines on exports to help ensure no items could be used for military purposes, such as the war in Ukraine. 

India and Russia have maintained close and friendly trade and defence relations over the decades even as New Delhi has more recently cultivated deeper ties with the United States in the face of a resurgent China across the border. 

In later half of 2022, Russia shared with India and other countries a list of hundreds of items it wanted to import including axles, crankshafts, fasteners, pistons, bumpers, bearings and welding materials.

During the current fiscal year ending in March, domestic exporters are expected to receive over one billion dollars' worth of payments in rupees from Russia, said Garodia, a body of over 12,000 small engineering goods exporters. 

India has not officially released the figures of bilateral trade settlements in local currency. 

"Exporters are happy that they are receiving payments in rupees for exports to Russia," he said, despite a marginal fall in exports to other regions due to a decline in global demand and attacks by Yemen's Houthis on shipping in the Red Sea.

The latest round of US sanctions against Russia in December has made cross-border settlements with many countries more complicated because the risk of secondary sanctions has risen, Russian Central Bank Governor Elvira Nabiullina has said.

India's engineering items exports to Russia recorded 88 per cent year-on-year growth in December, while for the April-December period they jumped 130% to $1.03 billion, EEPC said.

Indian engineering exports to Russia, including auto parts, electrical equipment and machinery, are expected to touch $1.5 billion by March 31, Garodia said.

The country's total exports to Russia rose 46.2 per cent year-on-year to $2.7 billion in the first eight months of FY24 ending in March, while imports rose 54.8 per cent to $40.5 billion during the same period, the Ministry of Commerce, Government of India data showed. 

Garodia, a Kolkata-based exporter, said freight costs had gone up significantly due to the Houthi attacks on cargo ships in the Red Sea. 

Further, he said every effort was being made to sustain exports to Russia, Europe and other countries by routing ships around Africa's Cape of Good Hope.

(With Reuters Inputs)