India and Russia are now “actively engaged” in developing an appropriate mechanism for rupee-rouble trade. Currently, the two-way dollar-denominated trade between the two countries stands at $11 billion.

An External Affairs Ministry source told BusinessLine that a Russia-India special working group to create a mechanism for the use of rupee and rouble for trade settlements, has been engaged in dialogue since October last year.

“The dialogues are continuing. This remains a work-in-progress,” said the Ministry official.

This group, with representatives from the central banks, export-import banks, commercial banks and governments of both the countries, have conducted a number of sessions so far on the relevant issues.

The aim of the group is to develop specific measures for creation of a convenient regulatory environment for settlements in the two national currencies and effective schemes for the actual settlements. It is expected that the trading volume between the two countries will rise after such mechanisms are put in place.

Engineering, agriculture commodities, defence equipment, crude oil and gas are principal items in the present Russia-India trade basket. Expectations are that the working group will come up with pragmatic solutions during 2015-16.

The initiative is significant in the context of efforts by BRICS nations — Brazil, Russia, India, China and South Africa — to avoid dollar-denominated trade. Russia and China have already established a mechanism to settle their mutual trades in rouble and yuan.

As a first move, India and Russia need to organise exchange trading of the two national currencies in one another’s country.

One of the key issues, which is learnt to be among the discussion subjects, is to have a currency-swap agreement as a precursor to settlement in the two currencies at a later stage.

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