India has $5 bn new export opportunity in Russia: FIEO

With Europe maintaining trade sanctions on Russia, India has the potential to export $5 billion worth of goods to Russia in the next 12 months, A Shakhtivel, President, Federation of Indian Export Organisations (FIEO) has said. The export demand is high and supplies can start as soon as the rupee payment mechanism gets operationalised, he added.

Addressing a press conference in Delhi on September 14, Shakhtivel said the Russian government is expected to identify the nodal bank of that country that will work out the payment mechanism with the State Bank of India (SBI) very soon. “With Europe maintaining sanctions on Russia, we expect the trade to divert from Russia to India. This has already happened in respect of petroleum products, iron & steel, and food products and is likely to be further accentuated in times to come”, he said.

According to him, rising inflation in developed economies will have an impact on high-value exports but will not affect low-value products in the $20-$25 range. On the other hand, exports of low-value products may increase in volume, though not in value.

Shakthivel said that contrary to the general perception, rupee depreciation is not providing much competitiveness to Indian exporters as currencies of most of the countries are depreciating more steeply. While the rupee has depreciated by 8.1% as on September 7, 2022, from a year ago, British Pound and Japanese Yen depreciated 16.1%. The Euro depreciated 16.8%, he explained.

Shakthivel welcomed the Reserve Bank of India’s decision to allow exports-imports in the Indian rupee. “This will help us to increase our exports to countries facing acute foreign exchange shortages or those covered by sanctions. However, to do costing for exports under the Indian rupee, exporters require clarity with regard to the applicability of export benefits which we feel may be extended on the analogy of Iran for which such a facility has been provided. Moreover, a lot of exporters who have imported under various schemes also require clarification regarding the acceptance of export obligation in the Indian rupee against imports made in free foreign currency. In this context, Export Credit Guarantee Corporation (ECGC) should also revisit its coverage for Russia which has moved from open to restricted cover and exporters are flagging the issue that ECGC is generally reluctant to provide such cover”, he added.