Sources: India will encourage rupee-settled exports to increase commerce with Russia

According to government and industry sources, India may offer incentives to exporters settling deals in rupees to promote the attractiveness of the currency and raise the sales of commodities to Russia, which have decreased as a result of western sanctions.

After the Reserve Bank of India (RBI) established a framework for international trade settlements using the rupee last month, the measure is intended to increase Russian commerce. Indian businesses are already exchanging dollars and euros for Asian currencies to settle transactions in order to dodge the sanctions the West has imposed on Russia as a result of its invasion of Ukraine.

According to the three sources, the most likely inducement to be granted would be to extend an existing programme for transactions involving completely convertible currencies, like the dollar and the euro, to the rupee, which is only partially convertible.

A percentage of the taxes and customs duties that accrued throughout the full process of producing a good are refunded to Indian exporters under the current arrangement. According to the sources, the new incentive would apply those rebates to products exported using the rupee as the currency.

One of the sources, a senior government official who wished to remain anonymous because the conversations are private, stated that "the department of commerce is working with the central bank and the revenue department to ensure facilitation of rupee-related transactions as foreign exchange realisation in accordance with RBI's notification last month."

He continued, "Steps would be taken to extend the benefits of the foreign trade policy for such realisation.

Requests for comments on the incentives were not immediately answered by the RBI, the finance ministry, or the commerce ministry of India.

According to the sources, bankers and dealers have not yet increased their usage of the rupee for settlements since they are still waiting on further information about the government's and central bank's incentives to use the rupee.

The sources stated without providing a date that guidelines are anticipated "soon" and will aid in boosting trade with Russia.

Another source, a government official, claimed that India hoped to increase commerce with Russia by $6 to $7 billion over the following two months.

According to Reuters, India's imports from Russia, primarily crude oil, jumped five times to more than $15 billion between February 24, when Russia invaded Ukraine, and the end of July, compared to the prior year.

However, exports decreased from $1.34 billion in the same time to $852.22 million.