India Russia Trade
- March 2, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
India Russia Trade
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.
- Russia is India’s 25th 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/