Russia has invested “billions of rupees” in Indian equities and other assets, as well as infrastructure projects in the country, the Hindustan Times reported. Since 2022, funds received by Russian exporters for oil supplies to the South Asian country have been accumulated in special accounts in local currency. At the end of April, the media wrote that Russian financial institutions were asking the Reserve Bank of India to allow them to invest rupees in the republic’s securities. The interlocutors of Hindustan Times refused to disclose the details of the solution reached. However, as one of them said, most of the funds accumulated in India have been used up.
However, this solution to the issue is temporary, noted private investment consultant Andrei Kochetkov: “India is a country with a double deficit, that is, a deficit of both the state budget and foreign trade. Therefore, the republic always has problems with currency, and rupees, as you know, cannot buy very much. Accordingly, the option of investing stuck funds is only one way to solve the problem. But it does not solve it completely, because someday they will need to be withdrawn from these instruments, and the problem of withdrawing both the rupees themselves and converting them into currency will again arise.
More productive There may be a way to create joint ventures or invest specifically in production facilities in India itself, which can produce goods required on the Russian market. No other options are envisaged yet, except to make some kind of offsets with other countries that also trade with India.
Simply investing in securities is just hanging up your funds for a certain period, which in any case will end someday.”
Another problem is that it is extremely difficult to withdraw earned funds from India due to the peculiarities of the rupee – it is not a freely convertible currency, explained Dmitry Alexandrov, managing director of the investment company Ivolga Capital: “Now we can draw parallels between the Indian stock market and the Moscow Exchange . The fact is that both of them are closed, and in this sense they can show fairly high multipliers due to domestic demand and the absence of capital outflow.
Today, Indian shares, on the one hand, can be called overvalued, but, on the other hand, a growing economy, which generates quite a large demand from investors from within the country, and capital outflow is limited, in particular, we see this in the stuck rupees of Russian companies, which have now also entered the Indian stock market, constantly fueling the value of companies. Of course, you can call this a “bubble”, but this is a situation in which the “bubble” can accumulate for quite a long time.
On the Moscow Exchange we are only at the very, very beginning of the formation of this trend; it has been happening on the Indian market for several years now. But, in my opinion, it still has not yet reached its apogee.
Therefore, despite its fundamental overvaluation, interesting ideas are preserved due to these two factors: the closed economy and generally growing demand from within. At the same time, foreign investors are present in the Indian market, it is quite easy to invest in the country’s economy, it is difficult to withdraw your money from there.”
According to Hindustan Times, from April 2023 to February 2024 India's trade deficit with Russia amounted to almost $52 billion. Most of this money was kept in about 30 special accounts.
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