India’s seafood exports to Russia have seen a significant boost in the last nine months, thanks to the new mechanism of trade settlement in rupees that was introduced by the Reserve Bank of India (RBI) in July 2022. According to the data from the Marine Products Export Development Authority (MPEDA), India exported seafood worth $ 5.69 million to Russia in 2022, up from $ 4.03 million in 2021¹.
The rupee settlement system allows Indian exporters and importers to use a special vostro account linked to the correspondent bank of the partner country for receipts and payments denominated in rupees². This reduces the dependence on the US dollar and other foreign currencies, and also helps avoid the impact of sanctions and currency fluctuations.
The seafood industry, which mainly exports frozen shrimp and surimi to Russia, has welcomed the move as it opens up new opportunities and reduces transaction costs. “The rupee settlement has given us a competitive edge in the Russian market, as we can offer better prices and quality to our buyers. We also save on the exchange rate and commission charges that we used to incur earlier,” said Anwar Hashim, president of the Seafood Exporters Association of India (SEAI)³.
The SEAI has also requested the RBI and the MPEDA to extend the rupee settlement facility to other countries, especially in the Middle East and Southeast Asia, where India has a large trade surplus in seafood. “We believe that the rupee settlement can help us increase our market share and diversify our export destinations. It will also boost the confidence of the Indian seafood industry, which has been facing challenges due to the COVID-19 pandemic and the global shrimp price slump,” Hashim added³.
India is the world’s second-largest producer and exporter of seafood, with a total export value of $ 8.6 billion in 2022⁴. Russia is one of the emerging markets for Indian seafood, with a potential demand of 50,000 tonnes per year⁵. The rupee settlement mechanism is expected to further enhance the bilateral trade relations between the two countries and contribute to the growth of the Indian seafood sector.
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(2) Seafood exporters see bright spots in Russia as rupee … – Moneycontrol. https://www.moneycontrol.com/news/business/economy/seafood-exporters-see-bright-spots-in-russia-as-rupee-settlement-is-allowed-8855391.html.
(3) 39 Indian firms get Russian nod for seafood export – Business Standard. https://www.business-standard.com/article/markets/39-indian-firms-get-russian-nod-for-seafood-export-109101500014_1.html.
(4) India Exports of meat, fish and seafood preparations to Russia – 2024 …. https://tradingeconomics.com/india/exports/russia/meat-fish-seafood-preparations.
(5) Explainer: How Feasible Is RBI’s Push to Settle International Trade in …. https://thewire.in/economy/explainer-rbi-rupee-settlement-international-trade.
(6) Explained: Why RBI has allowed rupee settlement system for …. https://timesofindia.indiatimes.com/business/india-business/explained-why-rbi-has-allowed-rupee-settlement-system-for-international-trade/articleshow/92818342.cms.
(7) India, Russia Suspend Negotiations to Settle Trade in Rupees: Sources. https://www.tasnimnews.com/en/news/2023/05/06/2890472/india-russia-suspend-negotiations-to-settle-trade-in-rupees-sources.
(8) India, Russia said to suspend talks to settle trade in rupees. https://www.thehindu.com/business/india-russia-said-to-suspend-talks-to-settle-trade-in-rupees/article66812838.ece.
(9) India, Russia suspend negotiations to settle trade in rupees. https://economictimes.indiatimes.com/news/economy/foreign-trade/india-russia-suspend-negotiations-to-settle-trade-in-rupees-sources/articleshow/99982683.cms.
editor
1 March 2024