Comment by Riaz Haq on May 19, 2023 at 4:55pm

In the first 11 months of the 2022-23 financial year, Indian imports from Russia were worth nearly $41.5 billion (€38 billion), while exports amounted to just $2.8 billion, according to data from the Ministry of Commerce and Industry.

https://www.dw.com/en/russias-rupee-problem-risks-harming-trade-tie...


This has left Russian oil companies and banks with billions of rupees in their Indian bank accounts — a pile of cash they are struggling to use.

"I don't think this situation can continue for long," Nandan Unnikrishnan, distinguished fellow and Russia expert at the Observer Research Foundation (ORF) in New Delhi, told DW. "If both sides fail to resolve the problem, it will impact purchases of not only oil but everything."

Russian Foreign Minister Sergei Lavrov also recently commented on the issue while attending a Shanghai Cooperation Organization meeting in the Indian state of Goa.

"We need to use this money. But for this, these rupees must be transferred in another currency, and this is being discussed now," he was quoted by news agency Bloomberg as saying.


The uncertainties over payment mechanisms have also hurt defense imports, Bloomberg reported. New Delhi and Moscow share longstanding political and security ties.

India is a major buyer of Russian weapons, although it has been attempting to diversify its sources of military equipment, increasingly turning to countries like the US and France in recent years.

Russia accounted for $8.5 billion of the $18.3 billion New Delhi has spent on weapons imports since 2017, according to data from the Stockholm International Peace Research Institute.

Both sides are also in talks to reach a free trade agreement.

The Indian government has so far refrained from explicitly criticizing Russia's war in Ukraine. New Delhi has abstained several times from voting on UN resolutions against Moscow. It has, however, called for a peaceful resolution of the conflict through dialogue.

The ramping up of trade ties, meanwhile, has been viewed with concern in Western capitals, as they fear it's undermining the stringent sanctions regime in place against Moscow.

Besides the Indian rupee, the UAE dirhams and the Chinese yuan are seen by some as potential options to settle trade between India and Russia.

"Russia wants a currency that it can use to buy goods that it requires for its economy… the question is identifying that currency," said Unnikrishnan. "Russians would be happy to use the yuan," he underlined, pointing to their bilateral trade worth hundreds of billions of dollars.

In 2022, Russia-China commerce hit a record high of $190 billion.

But Unnikrishnan noted that New Delhi would not be comfortable allowing trade settlement in the yuan, given the tense relations between India and China due to their border disputes.

The Reuters news agency also reported in March, citing Indian officials, that the Indian government had asked banks and businesses to avoid using the yuan to pay for Russian imports.

Another option is the use of UAE dirhams to pay for India's Russian imports but experts say this might not offer a viable long-term solution, due to the sensitivity of that currency to Western sanctions.

Unnikrishnan stressed that India and Russia could come up with alternative solutions, like productively investing the rupees into joint ventures that produce goods that are of use to Russia or could be exported to other parts of the world.

"There are multiple ways to deploy this money, and both sides just have to show the political will to reach that agreement," Unnikrishnan said.

Comment by Riaz Haq on May 23, 2023 at 4:18pm

Russia pleads with India for help avoiding financial black list, warning oil and weapons deals are at risk, report says

https://finance.yahoo.com/news/russia-pleads-india-help-avoiding-22...

Filip De Mott


Russia could become black listed by the Financial Action Task Force in June.

To avoid this, Moscow is pressuring India to help thwart the blacklisting effort, Bloomberg reported.

Russia has told India that key energy and weapons deals would be at risk.

Russia is asking for India's support to avoid getting on a black list that would further isolate Moscow from global finance, Bloomberg reported.

The pressure comes as the Financial Action Task Force — an intergovernmental group focused on combating money laundering and terrorist financing — prepares for a June meeting, during which members could implement restrictions on Russia.

Though its invasion of Ukraine had already made Russia the world's most heavily sanctioned country, an FATF blacklisting would put Moscow in the same category as North Korea, Iran, and Myanmar.

If Russia is added to the black list, FATF members, banks, investment firms, and payment-processors must perform additional due diligence and could even enact countermeasures, according to Bloomberg.

Because Russia was suspended from FATF in February, it's urging other countries like India to help thwart the blacklisting effort.

The Kremlin has warned India that defense, energy, and transportation deals between the two countries would be at risk under the designation.

They include weapons exports, cooperation between oil firms Rosneft and Nayara Energy Limited, and the development of a railway corridor. Russia is India's top arm supplier and has emerged as a major oil supplier in the last year.

Russia has also said that even being added on the FATF's "gray list" — a less severe measure — would still threaten deals.

Moscow believes that India has "special credibility" within the FATF that should be used, but has also turned to other governments for similar support, sources told Bloomberg. Meanwhile, Ukraine has championed the black listing, but is not a member itself.

Read the original article on Business Insider

Comment by Riaz Haq on June 1, 2023 at 11:50am

#India Is Scrapping Rs 2,000 note. Critics call it ham-handed, saying it has shaken consumer confidence & damaged rupee. Others noted that while 2016 #demonetization helped gov't claw back nearly all of withdrawn bills, it didn't eliminate black money. https://www.nytimes.com/2023/05/31/business/india-2000-rs-rupee-not...

The move to retire 2,000-rupee notes, worth $24, has triggered bad memories of a similar campaign in 2016. It has also left some businesses short of change.

Indians have been filing into gas stations, jewelry stores, fruit stands and any other businesses that still accept soon-to-be-withdrawn 2,000-rupee notes, each worth about $24.

The race to spend India’s biggest bill has been on since its central bank announced this month that they would be removed from circulation by early fall.

India’s vast economy remains heavily reliant on cash, and many businesses have welcomed the surge in traffic, even if it has left them a bit short of change. Economists say retiring the big bill may help fight corruption, bring workers into the formal economy, improve tax collection and accelerate India’s push for digital payments.

But for some consumers, the move has dredged up unpleasant memories of 2016, when Prime Minister Narendra Modi’s sudden ban on large notes left them without enough cash for basic transactions. In an economy that is driven by rural and informal workers, some do not own bank accounts — or trust the government’s economic policies.

“It is better to buy gold or silver and keep it,” said Meenu Kevat, 32, a cleaner in New Delhi who does not have a bank account and hoards her cash earnings in a tin box. After the recent ban was announced, she said, it took her four days to cajole shopkeepers into converting 12 of her 2,000-rupee notes into smaller dominations.

“I don’t trust cash now the government can do anything it wants,” Ms. Kevat said, standing outside a grocery store in south Delhi. “It can cancel a note anytime, no matter how small or big.”

The fine print
In 2016, Mr. Modi’s government announced without warning that it was withdrawing India’s two largest denominations at the time — the 500- and 1,000-rupee bills — to expose and penalize people who held huge amounts of money that could not be accounted for.

After that sudden demonetization, A.T.M.s were overrun, and some retail businesses came to a standstill because customers were hoarding the little cash they had. And because the withdrawn notes amounted to about 86 percent of the cash in circulation at the time, the government decided to introduce the 2,000-rupee bill as a “remonetization” measure to ease the currency crunch.

So far, the move to withdraw the 2,000-rupee bills from circulation is causing far less disruption. That may be because they account for less than 11 percent of the currency in circulation. India’s 1.4 billion citizens also have until Sept. 30 to either spend the bills or exchange them at banks. (The bills will remain legal tender after that, but many Indians are taking the deadline seriously, because they worry that government policy could change.)

In the long term, removing the 2,000-rupee bills will probably help with a gradual, positive move toward formalization and transparency, said Phyllis Papadavid​, an economist who studied the 2016 demonetization program. More workers should be able to formally register and claim benefits, for example, and there will be higher barriers to tax evasion.

“I can’t think of any aspect of an economy that is worse off by digitalization or formalization, because, basically, you have better usage and management of information, and accountability,” said Ms. Papadavid, the director of research and advisory at Asia House, a research outfit in London.

In the short term, though, the cash rush has caused a few headaches.

Comment by Riaz Haq on June 1, 2023 at 12:17pm

#Russia doesn't know what to do with the $1 billion in #Indian rupees it is amassing in #India each month. #trade #currency #oil #Modi #BJP

https://www.businessinsider.com/dedollarization-russia-dollar-yuan-...

Russia's amassing $1 billion worth of Indian rupees each month that it's struggling to use.

India has been buying Russian oil using rupees as Moscow has been shut out of the USD-denominated global payments system.

But Russia now has problems using the rupees and repatriating the currency.

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