India and Russia have decided to discontinue conducting their bilateral trade settlements in Dollar and Euro and instead use the Rupee and the Rouble, according to a senior source in the Russian foreign ministry.
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New Delhi considers a mutual commitment to forgo Dollar and Euro transactions with Russia as an essential precaution because, otherwise, doing business with Russian banks and firms is either extremely difficult or impossible owing to sanctions.
The move is required, according to Zamir Kabulov, Chief of the India division at the Russian Ministry of Foreign Affairs, in order to deal with the trade imbalance and prepare for a full-fledged switch to national currencies.
S. Jaishankar, the foreign minister of India, and his Russian counterparts spoke about growing Indian exports during a visit to Moscow last month as India currently imports from Russia five times more than it exports.
Switching from Dollar may not be realistic
Pavan Kapoor, Indian Ambassador to Moscow said that without resolving the issue of the trade imbalance, a complete move to Rupee-Rouble settlements would result in a stockpiling of rupees with Russian banks.
In accordance with Pavan’s advice, Russian businesses might invest in manufacturing projects sponsored by the PLI plan and import more items from India using the rupees that Russian banks have amassed in India.
India and Russia plan Extensively for 2024
The sum of trade between India and Russia is expected to surpass $30 billion before the year 2022 comes to a close next week, driven by significant oil shipments and fertilizer purchases.
However, the boost in bilateral trade is not solely a result of lower oil prices brought on by the conflict in the Ukraine. Growth in non-oil trade was already averaging 46.5% by the end of 2021. Although the two nations’ combined trade volume in 2021 was 13 billion US dollars (up to 120%), there has been steady increase in bilateral trade despite the global oil and food security crises.
Moscow is interested in establishing interregional ties with Indian states, which are a further source of boosting trade volume and collaboration in the area of investments.
Dollar Might Lose its Hegemony
Governments are being urged to start resisting the dollar’s hegemony due to the it’s inherent power, President Joe Biden’s use of it to impose Russia-related sanctions this year, and emerging technological advancements.
Following the invasion of Ukraine, initiatives that had already been planned to promote China’s and Russia’s currencies for use in cross-border transactions, particularly by means of blockchain technology, quickly gained momentum. For instance, Russia started requiring compensation in rubles for electricity supply.
For instance, Russia started requiring compensation in rubles for electricity supply.
Laos, Bangladesh, and Kazakhstan among others promptly stepped up negotiations with China to increase their usage of the yuan. India has stepped up its advocacy for the globalization of the rupee in recent months, and only last month it began building a bilateral payment method with the United Arab Emirates.
Despite all the bluster and effort, it doesn’t seem likely that the dollar’s dominating status will be in danger very soon. Unquestionably large and robust, US Treasuries continue to rank among the safest investments, and most foreign exchange reserves are held in US dollars.
