New Delhi: As trade denominated in rupees with Russia and Sri Lanka is gaining momentum, India’s annual export of machinery, auto parts and other engineering goods to these countries witnessed significant growth in the nine months of FY24.
In an exclusive interview with Mint, Arun Kumar Garodia, chairman of the Engineering Export Promotion Council of India (EEPC), said that the trade of engineering goods with Russia has doubled to over $1 billion in nine months (April-December 2023). By the end of the current fiscal, Indian exporters are expected to receive their payments in rupees from Russia which will be worth over one billion dollars, said Garodia, who represents over 12,000 small engineering goods exporters. India is yet to officially release the figures of bilateral trade settlements in local currency.
Following the sanctions imposed on Moscow by the West after Russia invaded Ukraine in February 2022, Russia has signed deals with many countries like Iran and India to trade in local currencies, instead of the dollar.
“There is a manifold increase in the export of engineering goods to Russia and demand of our engineering products in other countries is rising," he said on Wednesday.
The trade in rupee currency will become very common in the coming years as there are several countries, like African nations, that are showing interest in doing trade via rupee payment mechanisms, he said.
India and Russia have had close trade and defence relations for decades.
On the crisis in the Red Sea, he said, “The disturbances have affected every country. India is not the only country that is facing challenges of exponential rise in freight cost as ships are using longer trade routes through Cape of Good Hope."
India’s engineering exports to Russia recorded 88% year-on-year growth in December, and in April-December, they jumped 130% to $1.03 billion, EEPC said.
Engineering exports to Russia, including auto parts, electrical equipment and machinery, are expected to touch $1.5 billion by 31 March, he said.
India’s total exports to Russia rose 46.2% year-on-year to $2.7 billion in the first eight months of fiscal year 2023/24 ending in March while imports rose 54.8% to $40.5 billion in the same period, commerce ministry data showed.
Decline in cumulative engineering exports narrowed to 0.44% with the growth achieved in December 2023. It was recorded at $79.51 billion in April-December 2023 as against $79.86 billion in April-December 2022.
Exporters face challenges on the supply side, too, dealing with high prices of metals and logistical issues.
The shipping crisis in the Red Sea is causing a lot of problems. About 80% of India’s goods trade with Europe, worth $14 billion per month, goes via the Red Sea. The crisis is not only causing delays but is increasing the cost of exports.