Re Payment for Trade to Increase Rice, Tea Exports to Russia, Iran

The Reserve Bank of India's decision to establish a mechanism for settling international trade in rupees will boost tea and basmati rice exports to Russia and Iran, where payment issues have been a problem. Russia and Iran are big buyers of Indian tea, and the latter is also a big buyer of basmati rice. Both of these countries are subject to Western sanctions.

India exports approximately 45 million kg of tea to Russia each year. However, due to the ongoing conflict between Russia and Ukraine, as well as US and European sanctions, tea exports to the country fell by 10% in January-April compared to the same period last year.

Mohit Agarwal, director, Asian Tea, a leading tea exporting firm, said "The government's move will help to sort out the payment issue. It will not only increase tea exports to Russia and Iran but will also help India to increase its tea exports to the UAE, Kazakhstan and China, and will remove the currency risk from our balance sheets."

"Overseas buyers can now open vostro account with an Indian bank and they can make payments in INR to Indian exporters. The forex risk gets transferred to the overseas buyer as the rupee amount is fixed (since invoiced in INR)," explained Abhishek Goenka, founder, and CEO, IFA Global.