A significant delegation of over 20 executives from India’s leather industry is gearing up for a strategic visit to Russia this month. The objective is clear: to attract investments and seize growing export opportunities in a market with immense potential.
The three-day visit, scheduled to commence on August 26, will be a crucial move in expanding India’s leather exports to Russia, which currently range between USD 60 million and USD 80 million annually.
“We see Russia as a market with huge possibilities for growth,”
R. Selvam, IAS, Executive Director of the Council for Leather Exports (CLE)
Despite current export levels, Selvam believes that the opportunities in Russia are vast, particularly in segments like leather garments, accessories, and footwear.
He also revealed that the delegation will participate in the Euro Shoes Premier Collection in Moscow, a prominent international fair. This event will serve as a platform to explore technology collaborations and investment opportunities in tannery operations and product manufacturing.
However, the path to expanding exports is not without challenges. The ongoing conflict between Russia and Ukraine has led to Western sanctions, complicating payment processes.
These sanctions, particularly those targeting Russian banks, have resulted in significant hurdles for Indian exporters. Many Indian banks are reluctant to issue Bank Realisation Certificates (BRCs) for payments coming from Russia, complicating the financial transactions necessary for trade.
“The major issue for this decline is the payment problem, specifically the non-issuance of BRCs by banks. The sanctions have hit Russia’s SEBR Bank particularly hard, as it remains a primary channel for transactions between the two nations.”
Selvam acknowledged the impact of these sanctions on trade
Despite these challenges, the leather sector has shown resilience. In the fiscal year 2023-24, the export of leather, leather products, and footwear to Russia witnessed a growth from USD 44.84 million in 2022-23 to USD 62.48 million.
However, recent figures indicate a downturn, with exports during April-June 2024 falling to USD 14.21 million, down from USD 16.34 million in the same period the previous year. The primary reason for this decline is the ongoing payment issues resulting from the sanctions.
In light of these challenges, India and Russia are exploring alternatives to circumvent the effects of the sanctions. One key area of focus is the possibility of conducting trade in local currencies, thereby bypassing some of the restrictions imposed by the sanctions.
Additionally, discussions are ongoing to reduce non-tariff barriers imposed by Moscow, which could further facilitate trade between the two countries.
The broader trade relationship between India and Russia is also under the spotlight, with both nations targeting a substantial increase in bilateral trade to USD 100 billion by 2030.
Currently, the trade volume stands at approximately USD 67 billion, with India’s exports to Russia amounting to USD 4.3 billion in 2023-24. In contrast, imports from Russia, driven primarily by crude oil, totaled USD 61.4 billion, resulting in a trade deficit of USD 57.1 billion. Notably, crude oil and petroleum products accounted for 88 percent of India’s imports from Russia.
In Conclusion, the upcoming visit by the Indian leather sector delegation to Russia is a strategic effort to bolster trade ties and overcome the challenges posed by international sanctions. By seeking investments and exploring new export opportunities, the delegation aims to strengthen India’s position in the Russian market. As India and Russia continue to explore ways to enhance bilateral trade, the leather industry’s efforts could play a vital role in achieving the ambitious targets set for the coming years.
