The collapse of the Russian rouble can be attributed to the fall in the crude oil prices and Western sanctions provoked by the Russian annexation of Crimea. It is a jigsaw puzzle as to how long the Russian currency will take to rally and attain some measure of parity with the American dollar. As someone said, while Western luxury items and foreign travel will go beyond the reach of the Russians, foreigners will be able to buy the best of caviar at low prices. The situation presents India with both a crisis and an opportunity. India exports large quantities of pharmaceutical products to Russia, which account for a quarter of its total bilateral trade.
The fall in the rouble’s value will make exports, contracted at old rates, less profitable. Even president Putin does not expect the rouble to regain its lost value in less than two years. True, India knows only too well the risks involved in trading with Russia. Even during the heydays of the Soviet Union, the rouble’s value was artificial. It never enjoyed parity with the dollar. The opportunity for India lies in the fact that Russia would, hereafter, be less inclined to meet its needs for goods and services from the Western market. India can provide most of the services and goods at competitive rates. India can also get access to the East European market through Russia.
Already, India enjoys considerable goodwill among Russians and East Europeans, thanks to the excellent ties they maintained during the days of the Soviet Union. The crisis should prompt India to negotiate bilateral trade in rupees, which is now a stabler currency than the rouble. It should also speed up work on the proposed free trade agreement with Russia. In any case, such free trade agreements have become the norm. None of this should pose any challenge to the Modi government. When it comes to trade and diplomatic relations, the prime minister is a realist, who does not want to be a prisoner of dogma. Nor would he like to be too close to one bloc at India’s cost!