Russia and India explore currency realignment in bilateral trade
In discussions about trade between Russia and India, analysts note a persistent hurdle: a growing pool of limited convertible rupees that Russia cannot settle through Indian banks. To prevent further buildup, experts propose shifting toward other countries’ units of account, including gold, or adopting more stable currencies such as the yuan, dirham, or alternative rupee arrangements. This assessment comes from industry observers who describe the situation as a practical challenge facing both economies.
One of the core issues shaping bilateral agreements is India’s sizable trade deficit with Russia. A chief macroeconomist at a major investment firm argues that converting the gathered rupees into currencies backed by robust financial systems would help stabilize trade flows. He notes that export and import volumes are rarely balanced, leaving Russian corporate ledgers with foreign currency exposures that must be settled in more stable units.
The expert reviewed several developing-country currencies as viable options for exchanging rupees, including the Indonesian rupiah, the Brazilian real, and the Mexican peso. He contends that initiating a transition to alternate account units should begin promptly, as delays would raise transaction costs in international trade and complicate settlement procedures.
As of early May, officials close to the matter indicated that discussions about using the rupee as a settlement currency continue. Both New Delhi and Moscow acknowledge that a range of technical and policy questions remains to be resolved before any formal shift can be introduced, including how the rupee could be converted to other units of account. High-level talks are expected to continue to address these questions while keeping the momentum of ongoing trade negotiations alive.
Analysts emphasize that a move toward diversified settlement currencies could reduce exposure to any single currency’s fluctuations and strengthen the resilience of bilateral trade under current global financial conditions. Adopting a broader set of account units would align with efforts by emerging economies to diversify away from traditional reserve currencies and to stabilize transactional costs in cross-border trade. The debate also touches on broader strategic considerations, including regional financial cooperation and the development of credible financial ecosystems capable of supporting more volatile commodity and energy transactions.
Ultimately, the discussions reflect a pragmatic approach to how multilateral commerce can proceed amid fluctuating exchange rates and changing currency regimes. While the exact mix of currencies or assets for settlement is not yet decided, anchoring trade in currencies with strong financial legitimacy remains central. The parties have signaled an intent to pursue a practical framework that can adapt to evolving market realities while preserving the speed and integrity of payment flows between Russia and India.
Cautions from officials indicate that any reform of settlement currencies will require careful calibration of regulations, banking arrangements, and risk management practices. The aim is to minimize friction in cross-border payments, maintain liquidity for exporters and importers, and ensure transparent pricing for both sides. As dialogue continues, observers expect a measured, incremental approach with pilots or phased implementations to demonstrate feasibility before broader adoption.