Non-oil imports from Russia surge; exports face hurdles
Premium- Total imports of non-crude merchandise jump more than 60% in April-July to $2.1 billion
India’s non-oil imports from Russia have surged in the first four months of this fiscal, adding to a sharp increase in crude oil purchases from Moscow, which is facing severe sanctions from the West over its invasion of Ukraine.
Total imports of non-crude items such as sunflower oil, fertilizers, silver, printed books, coriander seeds, and furniture items jumped 61% from the year-earlier during the April to July period to $2.1 billion, from $1.3 billion a year earlier, showed data from the commerce department. Crude, however, continued to dominate India-Russia bilateral trade, comprising 85% of India’s total imports, which climbed over fivefold to $13.3 billion during the period under review from $2.6 billion a year earlier.
However, New Delhi’s exports to the sanction-hit nation contracted by 30% during the April-July period without a smooth payment settlement mechanism. Exports to Russia stood at $714 million during the period.
With disruptions to the supply of sunflower oil from Ukraine due to the war, India moved to Russia, importing $276 million worth of sunflower oil during April-July, more than double the previous year’s $129 million. Silver imports stood at $60 million.
India also imported $1.05 billion worth of coal from Russia to meet a severe fossil fuel shortage during the peak summer season, over fivefold rise from $196 million last year.
Fertilizer imports jumped more than six times to $1.03 billion from $150 million last year. Chemicals and fertilizers minister Mansukh Mandaviya told the Parliament last month that India imported 774,000 tonnes of fertilizers from Russia in the first quarter, which was more than a fifth of the total fertilizer imports of 3.64 million tonnes.
July, in particular, saw imports jump more than six times to $4.2 billion from $624 million last year, and exports contract by 13% to $278 million. This follows the Reserve Bank of India (RBI) allowing trade settlement in rupees following the imposition of Western sanctions against Russia. However, the widening trade gap may not favour the rupee settlement mechanism.
Tea exports to Moscow fell 1% during April-July to $25.17 million, though they rebounded 21% in July to $8 million.
Ajay Sahai, director general and chief executive, Federation of Indian Export Organisations (FIEO), said India’s exports to Russia have fallen due to challenges in logistics and payment and banking issues. “Of late, there has been some pickup in exports, and tea exports, in particular, grew from $7.72 million in July 2021 to $10.26 million in July 2022. We are close to a breakthrough in payment mechanism, and once it operates, we will recover the lost exports," he said.
Queries sent to the commerce ministry remained unanswered.
Exporters have asked the government to extend export incentives under the rupee trade mechanism to boost shipments to Russia and increase the acceptability of the rupee.
“Rupee trade has been discussed with a lot of countries, including Russia and Iran. But, it only happens if there is a trade balance. If I export goods worth $1 billion and you import $1 billion, both parties retain the money at their respective ends, and everybody is happy. But with Russia, we have 10 times the imports than we export. So, yes, there is a very good chance of increasing our exports to Russia. Because when they are holding much of India rupee, either they will want to invest in capital in India or they would increase our exports," a commerce ministry official said.
Trade experts said RBI’s move to allow international business payments in rupees could ease trade flow with Brics nations, comprising Brazil, Russia, China and South Africa other than India, and sanctions-hit Iran, but the new settlement mechanism may not be easy to implement.
ravi.dutt@livemint.com
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