Trade deficit has widened to more than $80 billion in the first five months of the current financial year as the value of the rupee nosedived and global crude prices continue to shoot up.
The potential mechanism will allow Indian importers to pay for imports from Russia – mostly diamonds and petroleum – in Indian currency while Russia would be able to use those rupees to pay for its own imports. India had a similar mechanism with Iran earlier to work around the sanctions against the Islamic republic by Western powers, that were subsequently lifted in 2015. “Exporters will benefit from the move as Russia will be interested to use up its rupee reserves since the nation is facing a shortage of US dollars,” a senior external affairs ministry official said.
While both New Delhi and Tehran have been discussing ways to revive the mechanism from the beginning of this year, the United States insisted that India stop buying from Iran. On Tuesday, commerce secretary Anup Wadhawan said the finance ministry and the Reserve Bank of India will work out a mechanism to ensure that India-Iran trade does not get disrupted following the decision of the US to impose sanctions on import of Iranian crude.
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