And now, as the two eye a bilateral trade target of US$ 100 billion by 2030, after touching US$ 68.7 billion last year, both sides need to chart out a workable formula that would boost the payments mechanism.

Bilateral trade between the two has indeed increased in the last few years. But this does not reflect a true picture. The surge in bilateral trade is primarily driven by India’s imports of crude oil.

Indian imports from Russia are estimated at over US$ 64 billion. This imbalance has dented the local currency payments structure, leaving Moscow with a growing pile of unutilised Indian currency.

Denis Alipov, Ambassador of Russia to India, speaking virtually at an event hosted by the Indo-Russia ‘Innopraktika’ Technology Hub, underlined the need for the two countries to work out a structural mechanism to streamline mutual settlements through national currencies, thereby reducing dependence on Western banking infrastructure.

The problem of payments could further aggravate, with India now looking to expand the import of other key raw materials, including nickel and coal. Amid rising geopolitical uncertainties, critical minerals would be another thrust area for New Delhi.

Connecting Mir and RuPay

Meanwhile, the two countries are now working to connect their national payment systems: The Russian Mir and India’s RuPay. 

The issue was also discussed during Russian President Vladimir Putin’s visit to New Delhi in December last year. Mutual recognition of the Mir and RuPay systems could “eliminate the need for intermediaries and reduce commissions on currency exchange by up to 30%,” according to Russia Today.

Both countries have tried to somewhat resolve the issue with Russia by “injecting more capital into Russian businesses in India,” as research by the Observer Research Foundation (ORF) noted.

The Unused Rupee Problem

India and Russia have been promoting Rupee-Ruble trade as a credible payments alternative after the suspension of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging network. A practical framework is missing even as payments in national currencies have witnessed a growth.

According to reports, 90% of the trade settlement is being made in national currencies. The problem which India needs to resolve is this: Ruble is being used effectively but with Russia being left with an unused Rupee pile, the tilt is often to use currencies of other nations, including China’s.

In fact, the issue of expanding payments in national currencies would be one of the thrust areas in the BRICS dialogues this year. BRICS is made up of 11 emerging markets and developing countries: Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russia, Saudi Arabia, South Africa, and the United Arab Emirates.

Russia Today, quoting the country’s finance ministry data, added that “national currencies made up 65% of BRICS trade in 2024, with the dollar and euro falling below 30%”.

Rising Geopolitical Risks

“Trade restrictions and technology controls are no longer occasional instruments, they are now part of the grammar of international statecraft,” Harsh Vardhan Shringla, Rajya Sabha member and former foreign secretary, who was also present at the event, said adding that imports of Russian oil have provided India much needed strategic autonomy while helping maintain economic stability at home despite the global risks. 

A credible payments system is the need of the hour, given the rising geopolitical risks.

“India must take this bit with utmost seriousness and work out a mechanism that would integrate the payments systems of both countries, especially as fractured payments systems can jeopardise economic growth,” Swadeshi Jagran Manch national co-convenor Ashwani Mahajan said. “Payments systems are being weaponised, and this needs to end,” he said.