Turning disaster into opportunity, India is considering rupee-ruble payment for trade with Russia!

India is working on a mechanism to facilitate trade with Russia using local currencies, a decision is expected early next week. Modi government is all set to bypass US sanctions on Russia. The government is exploring alternatives to the US dollar to transact with its ally.
India Russia to start local currency transactions in key regions The central government is considering allowing India-Russia trade in local currencies. Initially, local currency transactions will be done in sectors such as agriculture, pharma and energy sectors. These are areas in which the US and its allies have not imposed collective sanctions.

According to Madan Sabnavis, Chief Economist, Bank of Baroda, India has taken a neutral stance on Russia and hence there is no official restriction on trade and investment transactions between the two countries. To complete the transactions between the two countries, Having an exchange rate is a must. With Russia out of SWIFT, transactions will have to be settled in local currencies. Sabnavis said, the central banks of the two countries will have to discuss how to arrive at an appropriate rupee-ruble rate. But with SWIFT being the main mode of fund transfer, these trading operations will be difficult. In addition, the ruble has fallen sharply against the dollar since the war began and there is talk of sanctions.
India has already tried it with success
For decades, India has paid almost every country, including Russia, in US dollars for its transactions, but US sanctions on Russia have made it impossible to continue doing so. Any foreign currency except the US dollar will be used as the benchmark and contract payments will be made directly in Rupee-Ruble trading. This is not the first time India is trying to trade in the local currency. Earlier, tea was traded in Rupee-Ruble trade. This mechanism has also been tried successfully with Iran when Western countries imposed sanctions on the Islamic Republic.

One problem with currency payments to solve is choosing the banks through which payments will be made, because no bank wants to face the wrath of the United States. On the Indian side, there are banks that have operations overseas which may get hurt due to US sanctions in the future. If large-scale trade with Russia is successfully attempted, India may import imports to other sanctioned countries such as Iran and Venezuela. and may expand the mechanism for exports. The need to reduce dependence on the US dollar It is important for India to have an alternative payment mechanism with Russia as the US, EU and UK have signed at least seven Russian banks to the Society for Worldwide Interbank Financial Telecommunication (Swift), a global secure interbank system. It communicates payment instructions and enables transactions between banks in countries all over the world.

For the US government, companies such as Apple (suspended financial services in Russia), Google (suspended Russia Today channel and many other services in Russia), Amazon, Starlink, Tesla and every other company that offers its services overseas is a weapon. These companies seek access to foreign markets in the name of offering innovative goods and services. India has already developed the world’s most sophisticated Digital Payment System (UPI) and now the country should provide the world an alternative to western hegemony in the financial world. If a system like UPI can be adopted for global transactions , then the dominant US position in the financial services industry would be lost. India has already kicked off US financial services companies such as Visa and American Express, other countries will also be able to do the same if a system like UPI is successful on a global scale. Let us tell you that India was used by both the countries three decades ago. The company wants a floating exchange rate rather than a fixed exchange rate, given that the ruble’s market value has declined in recent weeks. If an exchange rate is established now, India will benefit in the long run