Following the depletion of the West Asian nation's rupee reserves in recent weeks, India faces the possibility of losing one of its largest markets for basmati rice exports, Iran, people familiar with the matter said on 28th June 2023. The problem has also hampered the export of other commodities to Iran, such as tea and pharmaceuticals, according to the sources.
Agricultural Trade Between The Countries
After India stopped importing crude, the trade balance, which had previously favored Iran until May 2019, gradually shifted in India's favor. While India imported only $672 million worth of goods from Iran in 2022–2023, its exports to Iran totaled $1.66 billion (mostly basmati rice).
According to government statistics, Iran has been either the largest or second-largest importer of Indian basmati rice since 2014–15. In the years 2017–18, 2018–19, 2019–2020, and 2021–22, it was the primary importer of the commodity. In 2014–15, Iran imported 935,567 tons of basmati, reaching a peak of 1.4 million tons in 2018–19. It imported 998,879 tons in 2022-23 or 20.35% of the nation's 4.5 million tons of total basmati exports.
India exported $3.37 billion to Iran in 2019–20 compared to $3.51 billion in FY19, a relatively slight decrease from the previous year (less than 5%). Other significant Indian exports to Iran included tea, sugar and pharmaceuticals.
India exported goods worth $123 million (primarily basmati rice) in the first month of the current fiscal year (April 2023), representing a 1.06% year-on-year increase, while imports fell by 7.24% to $69 million.
While the Iranian side has been attempting to find a way to resume basmati rice imports from India, importers in Iran have reportedly started looking into the possibility of increasing rice purchases from other producers like Pakistan, Turkey, and Thailand.
It was reported that Iran had been paying for imports with rupee reserves accumulated from oil exports to India before New Delhi stopped buying Iranian crude in mid-2019 due to US sanctions against Tehran. Under the condition of anonymity, two people claimed that trade between Iran and India has significantly decreased since 2019–20 after New Delhi stopped purchasing Iranian crude in May 2019. Up until that point, Iran, along with Saudi Arabia and Iraq, was one of the nation's top three energy suppliers.
A person said that, “It appears that Iran has exhausted all its rupee reserves, and thereby the trade in local currencies of the respective countries is not possible.”
Efforts To Strengthen Rupee Reserves
According to official data, India’s crude oil trade with Iran fell sharply in 2019-20, compared to the previous fiscal. Imports, mainly Iranian crude, fell about 90% to $1.4 billion, as compared to $13.53 billion in 2018-19.
India imported about 23.5 million tons of Iranian crude in 2018-19, nearly one-tenth of its total requirement, on favorable terms such as a 60-day credit and other discounts. Aside from crude, India primarily imported from Iran petroleum products, dye intermediaries, and fruits, and primarily exported basmati rice.
According to the sources, the Iranian side raised the issue with the Indian side in a number of recent meetings and offered to resume oil exports as a way to increase rupee reserves. The Iranian side also cited India's decision to continue buying Russian crude in the face of Western sanctions and claimed that New Delhi should take a similar stance in order to resume buying Iranian energy.
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