New Delhi, Feb 23 (KNN) Russia has recently utilised a significant portion of its rupee balance, estimated at over USD 8 billion, accumulated in special vostro accounts of Indian banks.

This balance primarily originated from payments made for Russian defence acquisitions, marking a pivotal aspect of the intricate economic relations between India and Russia, reported businessline.

The utilisation of these funds by Russia has been meticulously orchestrated through various channels, reflecting a strategic approach to economic collaboration.

Notably, a significant portion of the rupee balance has been directed towards financing Indian imports, which witnessed a notable uptick of approximately 39 per cent in 2023, reaching USD 4.05 billion.

This surge in imports underscores the depth of economic engagement between the two nations, extending beyond defence procurement.

Moreover, Russia's investment strategy encompasses diverse sectors, including infrastructure projects, the equity market, and government securities.

This multifaceted approach reflects a concerted effort to leverage the accumulated rupee balances for mutual benefit, contributing to the economic growth and stability of both nations.

Key stakeholders emphasise the collaborative efforts undertaken by the Indian government and the Reserve Bank of India (RBI) to address Russia's concerns regarding the accumulation of rupee payments.

Through dialogue and cooperation, suitable avenues for investment were identified, fostering an environment conducive to the effective utilisation of funds.

The strategic partnership between India and Russia extends beyond conventional defence procurement, encompassing ambitious joint ventures such as the Vande Bharat deal, aimed at manufacturing and maintaining trains for the Indian Railways.

Additionally, agreements such as the one involving Goa shipyards to construct cargo ships for operation in the Caspian Sea underscore the diversified nature of bilateral economic cooperation.

Central to this collaboration is the rupee payment system established between the two nations, serving as a resilient mechanism to circumvent the economic sanctions imposed by Western countries.

This system, facilitated by a network of Russian and Indian banks, has played a pivotal role in sustaining trade relations amidst external pressures.

Despite India's trade deficit with Russia, driven primarily by oil imports valued at over USD 40 billion, innovative practices such as smart billing have enabled India to navigate within prescribed price caps, mitigating the risk of further economic repercussions.

As both nations continue to explore avenues for cooperation and investment, the prospects for sustained bilateral trade and economic growth remain promising, underscoring the resilience of their partnership in the face of global uncertainties.

(KNN Bureau)