India’s exports get huge boost from curbs-hit Iran.

India’s exports to Iran, which faced major disruption following the EU and US sanctions on that country, got a boost with an Indian bank issuing lines of credit worth $750 million to Iranian importers from June 15.

With this, the rupee payment mechanism worked out earlier by the two countries has got stabilised. The payment mechanism allows India to pay for 45 per cent of imports in rupees, which is forcing Iranian importers to step up trade with India.

Robust export orders have started flowing in from Iran from the middle of June, particularly for agricultural and pharmaceuticals products, medical equipment and steel. A large trade delegation from India visited Iran recently to tap business opportunities that have opened up after the sanctions imposed by the US and EU.

India’s exports to Iran stood at $2.5 billion in 2010-11, while imports — which mainly constitute oil — added up to $10.9 billion.

To use up the 45 per cent of the import bill to be paid in rupees, India’s exports will have to rise to $4.5 billion - $5 billion.

“Traditionally, Iran has looked at the west for its import requirements, which stand at $60 billion annually. However, the recent sanctions imposed by the US have provided us an opportunity to try and balance out the huge trade deficit that runs up to $8 billion-$9 billion at present,” a senior commerce ministry official told Financial Chronicle.

The official said a good volume of orders had come in since the middle of June after the rupee payment mechanism got stabilised. However, he refused to divulge the quantum of export orders. “India’s exports to Iran should touch $4.5 billion - $5 billion in the coming years,” the official said.

Sources in the exporting community told Financial Chronicle that UCO Bank has issued lines of credit (LCs) worth $750 million in less than 20 days and this could go up to $1 billion by next month.

The Federation of Indian Exports Organisation (Fieo) led an 80-member delegation to Iran in March to explore export opportunities. This was followed by a small Iranian delegation’s visit to India in mid-May, when they proposed to enhance imports from India to $25 billion in the long run.

While raising imports from India would help Iran utilise the available rupee payment and source cheaper products from India, it will provide a major boost to domestic exports at a time when Indian exporters are looking to diversify their markets in the wake of the slowdown in the US and Europe.

Iran is India’s second largest crude oil supplier, accounting for 12 per cent of total crude imports. Bilateral trade between the two countries stood at $13.6 billion in 2010-11 with exports from India pegged at $2.7 billion and imports from Iran amounting to $10.9 billion.

India’s major exports to Iran include cereals, inorganic and organic chemicals, iron, steel and their products and tea, coffee and spices. Mineral fuel import constitutes over 90 per cent of India’s imports from Iran, followed by organic chemicals and ores.

Source : wrd.mydigitalfc.com