India Russia Trade

India Russia Trade

Topic: Economy

Context: India’s exports to Russia come under a shadow following economic and banking sanctions imposed by the US, the UK and the EU for invading Ukraine.

Concept:

• Russia is India’s 25^th largest trading partner and imports considerable volumes of Tea, pharmaceuticals, mobile phones and other electronics, machinery, iron and steel and apparels from India.
• India’s total exports to Russia were valued at $2.6bn while imports were at $5.4bn.
• As most Russian banks have been blocked from the SWIFT international payment system, Russian companies find it difficult to put through financial transactions.
• Russian importers who have entities in other countries (Turkey, Hong Kong or the UAE) suggested that India should allow third country payments.
• But this alternative option may lead to payment delays as Ruble is not a freely convertible currency and determining exchange rate is an issue. Also, the need for advance declaration at time of shipment and shipment cost are other complications.

Third Party payments:

Third-party refers to an entity other than the buyer or the seller. To ease procedures, in 2013 the Reserve Bank allowed third-party payment for export and import transactions with certain conditions.

• Third-party transaction should take place through the banking channel and with a Financial Action Task Force (FATF) compliant country.
• Payment for exports has to be received from the overseas buyer named in the Export Declaration Form (EDF) by the exporter and the payment shall be received in a currency appropriate to the place of final destination as mentioned in the EDF irrespective of the country of residence of the buyer.
• Similarly, the payments for the import should be made to the original overseas seller of the goods.

To read about SWIFT, refer https://optimizeias.com/swift/