Two Indian government officials told Reuters that India and Russia have suspended efforts to settle bilateral trade in rupees, after months of negotiations.
With a large trade gap in Russia’s favour, Moscow believes it will end up with an annual rupee surplus of more than $40 billion if a deal is reached and feels that the rupee build-up is “undesirable”, according to an Indian government official.
India’s share of world exports of goods is also only about 2% and these factors reduce the need for other countries to hold the rupee.
A second Indian government official involved in the discussions said Russia is not comfortable with holding rupees and wants to be paid in Chinese yuan or other currencies.
India started trying to reach a rupee settlement mechanism with Russia after it invaded Ukraine in February last year. Most trade takes place in dollars as well as other currencies.