While trade bodies say there is tremendous interest to import goods from India, the fear of sanctions and reluctance of banks to complete the transactions have made exporters wary of pushing their goods.But industry experts believe that some of the goods to Russia may be routed via UAE, which has significantly benefited from the tension in Ukraine and Russia.
Thanks to massive oil imports, Russia has emerged as India’s fourth largest trading partner with total trade estimated at $65.7 billion. After China, India had the second highest trade deficit with Russia, pegged at over $57 billion. Although there has been a buzz about recent moves to allow Russian exporters, who receive the payment in rupees, to invest more freely, the norms have always been there since RBI put in place the mechanism. There have also been several trade missions to explore export opportunities in Russia, some of which can use the rupee balances.
But exporters are shy, arguing that banks are reluctant. “Most Indian banks don’t want to take up this business, fearing possible sanctions,” said a large Indian exporter.
While Russian entities such as SberBank are willing to route funds through their Indian branch, domestic players want to avoid these transactions. “My advice to fellow exporters has been to route all exports through a small subsidiary so that the other parts of the business are not exposed to any sanctions,” said another exporter, who has stopped all business with Russia for the last two years. A German buyer is, however, sourcing goods from this exporter and then exporting to Russia.
Sectors such as auto components had seen a lot of interest post-sanctions but the exposure of Indian companies to American buyers and global car giants has seen them stay away.
Latest official data showed that in 2023-24, exports to Russia climbed over 35% to $4.3 billion, when India’s cumulative goods exports were more than 3% lower. Of the $1.2 billion increase, nearly a half was on account of machines and machine parts, including electronics.
