New Delhi,  The efforts of the Indian central bank to promote trade in rupees are bringing results, with state-run UCO Bank receiving necessary RBI approvals to open a special rupee vostro account in Russia's Gazprombank. This will help to facilitate growing trade between the two countries and discover new industry areas of cooperation.

The Reserve Bank of India put a mechanism in place for international trade settlements in Indian rupees (INR) in July 2022 to meet the long-term goal of internationalising the currency and enhance the growth of global trade. This step allows Indian exporters and importers to use special rupee vostro accounts to settle trade denominated in rupees.

UCO Bank will put operational modalities in place before opening the account with its Russian counterpart, said Soma Sankara Prasad, managing director and chief executive officer at UCO Bank. Although there is no clear timeline on when transactions can begin, the first step towards the new financial order has been already made.

Bilateral trade between India and Russia has been flourishing for several months straight amid numerous sanctions adopted against the Russian Federation -- Indian businesses took the opportunity to fill vacant niches without hesitation.

The Russian government is also helping new businesses enter the country easily to fill the economic vacuum -- extra steps are being taken to streamline regulatory compliance and waive some fees. As a result, several Indian businesses, including exporters and major homegrown retail chains, have signed deals with Russian businesses to seize the opportunity.

The disruption in relations with European countries has led to an oversupply of commodities such as petroleum products, ferrous and non-ferrous metals, and coal in Russia; it has also become the reason for a systematic decline in the prices of these export commodities. This creates additional benefits for Indian importers. Major gains have been made in petroleum, gas, diamonds, fertilisers, iron, steel, and paper. As of May, Russia was already India's second-largest oil supplier.

Despite these impressive figures, there is still room for further growth. Various experts estimate the bilateral trade potential at $25-30 billion, assuming the removal of trade duties and the development of new trade routes. Russian aluminium tycoon and founder of En+ Group Oleg Deripaska recently stated that Moscow desires to build connectivity, capital markets and financial infrastructure with India -- similar to the model built over decades with Europe -- to push bilateral trade to $120-150 billion over the next decade.

With the development of the North-South Multimodal Transport Corridor, the countries will have the shortest trade route through Iran and can expand the list of industries for mutually beneficial cooperation.

India and Russia can significantly diversify their trade basket and economic exchanges by going beyond the traditional sectors and cooperating in new areas such as railways, transport, logistics, pharmaceuticals, minerals, and metallurgy, which would give further impetus to bilateral ties.

The cooperation in aluminium industry is likely to evolve, largely due to the development of the power grid. According to current estimates, more than 1/3 of all additional aluminium demand in India in the coming years will come from the cable industry due to the high rate of electrification. Other promising cooperation areas include automotive industry, and supply of primary aluminium and semi-finished products.

Clearly, developing bilateral trade is a win-win scenario for both countries.

Moreover, once Indian goods enter Russia, they will have unhindered access to markets in other CIS countries, so the continued efforts of both governments to facilitate bilateral trade are key to the overall well-being of their economies. And the development of trade in national currencies is one of the most important steps on this path.