India-Russia Trade: Is Indian Rupee Worthless For Cross-Border Transactions?

[RiazHaq]

India-Russia Trade: Is Indian Rupee Worthless For Cross-Border Transactions?

What good is a currency in global trade if it can not be used to buy products and services from other nations that a country needs? The ans...

www.southasiainvestor.com

What good is a currency in global trade if it can not be used to buy products and services from other nations that a country needs? The answer to this question came when Russia said it has accumulated billions of rupees in Indian banks which it can not use. “This is a problem”, Russian Foreign Minister Sergei Lavrov told reporters in India’s Western state of Goa on the sidelines of the Shanghai Cooperation Organization meeting. “We need to use this money. But for this, these rupees must be transferred in another currency, and this is being discussed now”. Russia has decided it won't take any more Indian rupees. Moscow has rejected New Delhi's proposal for the Kremlin to invest rupees from oil and military equipment payments back into Indian capital markets so the currency doesn't pile up.

Global Export Map 2023. Source: World Population Review

Only the currencies issued by the governments of the world's largest exporters are useful for buying products and services on the world markets. China, United States, Germany, Japan and the United Kingdom are the world's top 5 exporting nations as of 2020. This makes Chinese Yuan, US Dollar, European Euro, Japanese Yen and British Pound the most important international trade currencies. Of these currencies, only the Chinese Yuan is not impacted by the western sanctions on trade with Russia. Russia wants India to convert Indian Rupees to Chinese Yuan to pay for energy and military equipment imports from Russia.

Yuan vs Dollar in Chinese Cross-Border Trade. Source: Bloomberg

The share of the Chinese Yuan in international trade has been increasing since the US imposed sanctions on the use of the US dollar in trade with Russia. Earlier this year, the Chinese Yuan eclipsed the US dollar as the most used currency for Chinese cross-border transactions, according to Market Insider. The Yuan's use in cross-border payments and receipts rose to 48.4% at the end of March while the dollar's share slid to 46.7%, according to a Reuters calculation of data from China's State Administration of Foreign Exchange. The yuan's use in global trade finance remains low, though it has shown steady increases. Data from SWIFT showed that the Chinese yuan's share of global currency transactions for trade finance rose to 4.5% in March, while the US dollar accounted for 83.71%, according to Reuters.

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India-Russia Trade: Is Indian Rupee Worthless For Cross-Border Transactions?

What good is a currency in global trade if it can not be used to buy products and services from other nations that a country needs? The ans...

www.southasiainvestor.com

 

[Azadkashmir]

barter than

 

[RiazHaq]

Gold Price in Indian Rupee is at a current level of 165970.1 per troy ounce, up from 165491.9 the previous market day and up from 142229.0 one year ago. This is a change of 0.29% from the previous market day and 16.69% from one year ago.

Gold Price in Indian Rupee

In depth view into Gold Price in Indian Rupee including historical data from 1979 to 2023, charts and stats.

ycharts.com

 

[wildlens]

Will be worthy only if indias share of global trade increases.

 

[SoulSpokesman]

@RiazHaq

Brofessor sb,

Most of India's exports- which increasingly will come from the services sector- are and will continue to be West driven. Since Western currencies (USD, GBP, EURO) are anyway most marketable, it makes no sense for either party to use INR.

INR may become an important currency for our neighbours ( to some extent it already is) and to some extent Gulf countries, but that is about it.

Regards

 

[RiazHaq]

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.

Russia's rupee problem risks harming trade ties with India – DW – 05/15/2023

As sanctions cut off major Russian banks from much of the West's payment systems, finding ways to pay for the crude India imports from Russia has become a challenge.

www.dw.com

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.

barter than

Barter works when both sides exchange products/services of roughly equal value.

Russians don't need refined petroleum products which are India's top export.

Russians need products which the West wouldn't sell to them...such as electronics components, sophisticated machinery and other products that China can produce and supply. Russians need Chinese Yuans, not Indian rupees for that.

 

[Menthol]

Russia can use Rupee to buy India's gold.

It will solve the problem.

 

[RiazHaq]

#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-notes.html?smid=tw-share

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.

 

[RiazHaq]

#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

Russia doesn't know what to do with the $1 billion in rupees it is amassing in India each month

Russia cannot even send the rupees back home either because India has restrictions over capital flows by foreign investors.

www.businessinsider.com

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.

 

[mmr]

Lol good Russia should keep taking ruppee lmao

 

[dbc]

Lol good Russia should keep taking ruppee lmao

Russia is already choking on Renminbi, trade in Indian rupee will cause constipation.

RMB-based trade hasn't worked out for Moscow - Asia Times

Although China and Russia have in recent months encouraged companies to settle their trade in the two countries’ currencies to try to end “dollar

asiatimes.com

 

[dbc]

Bloomberg says Russia is holding 147 Billion Dollars worth of Indian Rupees in Indian banks. LOL Russia is fooked

Russia’s Rupee Trap Is Adding to $147 Billion Hoard Stuck Abroad

A lopsided trade relationship with India is forcing Russia to accumulate up to $1 billion each month in rupee assets that remain stranded outside the country, swelling the stockpile of capital it’s amassed abroad since the invasion of Ukraine.

www.bloomberg.com

 

[protean]

All the negative news that @RiazHaq posts on India lately actually feels like a positive news for India. India and Russia will work out a mechanism to sort this issue out while our neighbors will move on to find some other dirt on India while their own house is in shatters. Kudos to priorities.

May be @RiazHaq should make a thread on how Pakistan growing at .3% and with inflation at 38% is actually doing better than India with 7.2% growth and a meager inflation of 4.5%. India is fuvked truly, all hail @RiazHaq, the premier economist. Lol.

Bloomberg says Russia is holding 147 Billion Dollars worth of Indian Rupees in Indian banks. LOL Russia is fooked

Russia’s Rupee Trap Is Adding to $147 Billion Hoard Stuck Abroad

A lopsided trade relationship with India is forcing Russia to accumulate up to $1 billion each month in rupee assets that remain stranded outside the country, swelling the stockpile of capital it’s amassed abroad since the invasion of Ukraine.

www.bloomberg.com

We are simply recovering all the money we spent on defence toys with them. D

On a serious note, they will simply trade the rupees with countries that need them like Bangladesh. That's how Indian rupee will become part of international currencies. Everything will work out in our favor. Just watch from the sidelines.

 

[mmr]

Bloomberg says Russia is holding 147 Billion Dollars worth of Indian Rupees in Indian banks. LOL Russia is fooked

Russia’s Rupee Trap Is Adding to $147 Billion Hoard Stuck Abroad

A lopsided trade relationship with India is forcing Russia to accumulate up to $1 billion each month in rupee assets that remain stranded outside the country, swelling the stockpile of capital it’s amassed abroad since the invasion of Ukraine.

www.bloomberg.com

So badly *****

Well they can buy lot of certain animal urine with it lmao

Indian famous export lmao

All the negative news that @RiazHaq posts on India lately actually feels like a positive news for India. India and Russia will work out a mechanism to sort this issue out while our neighbors will move on to find some other dirt on India while their own house is in shatters. Kudos to priorities.

May be @RiazHaq should make a thread on how Pakistan growing at .3% and with inflation at 34% is actually doing better than India with 7.2% growth and a meager inflation of 4.5%. India is fuvked truly, all hail @RiazHaq, the premier economist. Lol.


We are simply recovering all the money we spent on defence toys with them. D

On a serious note, they will simply trade the rupees with countries that need them like Bangladesh. That's how Indian rupee will become part of international currencies. Everything will work out in our favor. Just watch from the sidelines.

Bangladesh will export what to india? This will never work lmao

Russia is truly fucked but ya they kind of ask for it

 

[Chute]

Bloomberg says Russia is holding 147 Billion Dollars worth of Indian Rupees in Indian banks. LOL Russia is fooked

Russia’s Rupee Trap Is Adding to $147 Billion Hoard Stuck Abroad

A lopsided trade relationship with India is forcing Russia to accumulate up to $1 billion each month in rupee assets that remain stranded outside the country, swelling the stockpile of capital it’s amassed abroad since the invasion of Ukraine.

www.bloomberg.com

Maybe you should actually read what you post?

"Adding to" is not "is"

You do realise its impossible for India to have imported that much in a little more than 1 year from Russia?

1 billion a month, maybe do the math first?