As the West continues to impose sanctions on Russia for its invasion of Ukraine, India is exploring the possibility of making the Chinese yuan a reference currency to value the rupee-rouble trade mechanism, Mint reported.
The governments of both the countries may also look at a floating rate arrangement for trade between them, Indian government officials told the business daily.
India, the third-largest oil importer in the world, is planning to buy oil from Russia at a discounted rate to deal with inflationary pressures.
“We are working on a currency arrangement to facilitate trade, especially as we also plan to increase oil purchase from Russia," Mint quoted an official as saying.
Under the rupee-rouble trade mechanism, Indian exporters to Russia will get paid in rupees instead of dollars or euros. As part of the arrangement, an Indian bank will open an account in Russia while a Russian bank will open an account in an Indian bank.
Earlier, Hindustan Times had reported that the government had formed an inter-ministerial panel, led by Economic Affairs Secretary Ajay Seth, to scrutinise the impact of the Russian sanctions on the Indian economy.
The report also said India was identifying a potential bank to maintain its trade with Russia. Although the official quoted in the report did not mention the name of the bank being zeroed in on, he said the government would prioritise imports of edible oil and fertilisers, a shortage of which could stoke food inflation in the country and also disrupt the agriculture sector.
The government had earlier tested the rupee-rouble payment mechanism on a small scale for a few items like tea.
“We can look at a floating exchange rate system. A third currency can be taken as a point of reference, maybe yuan," the official told Mint.
Meanwhile, to ensure a steady flow of crude oil, the Indian government is looking at resolving issues related to availability of ships, insurance cover for imports and the oil blends.
While India buys defence and nuclear products from Russia, Moscow imports pharmaceuticals, engineering and agriculture items from India.
At present, payments to Indian exporters of nearly $500 million for exports already made are stuck because of the sanctions.
