
Payment brightened: NF approves ratification of treaties on India's loan debts

At a meeting on Wednesday, November 27, the Federation Council approved the ratification of three treaties to international agreements between Russia and India to restructure India's debt on loans granted to it by Russia for the construction of nuclear power plants. The treaties also transfer to rubles the payment of the remaining debt. What these changes are related to and how the countries plan to cooperate on other economic issues - in the material "Izvestia".
Changing agreements
Restructuring is not related to the solvency of India and is technical in nature, said an expert on the stock market "BKS World of Investments" Evgeny Mironyuk.
- Problems with settlements in US dollars due to sanctions imposed on Russian banks prevented timely settlements in accordance with the terms of the contracts, he told Izvestia. - After repayment of accumulated and overdue debts in 2024, India is paying as per the schedule. As the delay in payments is due to external factors beyond the control of India and Russia, it will not affect bilateral relations.
The treaties to the international agreements between Russia and India, signed to restructure the debt on loans, change the order of payments due to the complexity of payments in dollars and provide for payment in rubles, agreed Tatyana Podolskaya, head of the Department of International Economic Relations of YURIU - a branch of the Presidential Academy.
- Russia and India have long been implementing measures to switch to payment in national currencies for foreign trade and other transactions in order to abandon toxic currencies. And ratification of these agreements is another step on this path. As of November 12, 2024, the share of national and alternative currencies in settlements between Russia and India has reached almost 90%," she told Izvestia.
Payments from India were resumed in March 2024 and the overdue debt was cleared. The Republic in today's global economy is the leader in economic growth with the largest population.
- As of September 2024, the country's economic growth rate was 6.7%. Thus, dynamic economic growth will ensure the solvency of the country, and a large population will ensure the growth of electricity needs, which are successfully covered by nuclear power plants built and under construction with the participation of Russia, - added Tatiana Podolskaya.
Level of creditworthiness
Among large countries India has one of the most significant levels of public debt: at the level of the consolidated budget the ratio of public debt to budget revenues is close to 400%, interest expenses to budget revenues - about 25%, said Dmitry Kulikov, director of the group of sovereign and regional ratings of ACRA. At the same time, the government debt is predominantly long maturity and domestic, which somewhat reduces the risk of refinancing.
- It should be understood that the Indian economy has many incentives to catch-up growth simply due to relative poverty - any infrastructure projects, including those in the energy sector, have a high payback potential. We are still observing average economic growth, consistently exceeding 6% - in this sense, India is in the echelon of countries that are now driving the world economy forward - it supports the economies of trading partner countries with growing domestic demand," the expert explained to Izvestia.
At the same time, India demonstrates sustainable economic growth and has significant foreign exchange reserves, emphasized Denis Astafiev, founder of the investment company SharesPro. This allows the country to fulfill its financial obligations in a timely manner. The transfer of debt settlements into rubles can reduce dependence on currency fluctuations. In addition, such a measure will simplify the process of payments between countries.
- Taking into account these factors, India will probably be able to repay its debt to Russia without delays," the expert told Izvestia. - Debt restructuring and the switch to ruble-denominated payments underscore the high level of trust between Russia and India. These steps testify to the strategic partnership and strengthen economic ties between the two countries.
The switch to settlements in national currencies, in his view, reflects the common desire of Russia and India to reduce dependence on the US dollar in international transactions. This is in line with their interests in strengthening their financial sovereignty.
In addition, the depreciation of the ruble creates economic advantages for India in paying its debt obligations. This has a positive impact on settlements with Russia and makes them more favorable for the Indian side.
In general, such measures contribute to the further development of bilateral relations, strengthen cooperation and open new prospects for interaction, says Denis Astafiev.
Credit risk
The main factor that necessitated the latest amendments to the terms of the Russian-Indian agreement on loans for NPP construction was temporary infrastructure problems, namely problems with making payments in foreign currency under sanctions pressure. Risks of repeated payment delays after the elimination of these bottlenecks will have to be significantly reduced, Kirill Lysenko, junior analyst for sovereign and regional ratings at Expert RA, believes.
- The credit risk of the project is low. Rosatom's Indian partner - Nuclear Power Corporation of India - has stable financial indicators assessed by the country's rating agencies at a high level. The load factor of already commissioned reactors has reached 80% in recent years, and the demand for electricity in the country is growing, so we should expect good dynamics of cash flows under the project, which will be used to repay obligations," he told Izvestia.
According to him, the risk factor is a possible situation of excessive redirection of resources to new investments of the company, which was observed in the late 2010s - this led to delays in payments to Rosatom. According to information as of August this year, the third and fourth power units are three-quarters complete (they were 72 months overdue and 73% over cost). Construction of the fifth and sixth units is on track. The growing ties between Russia and India increase the incentive for local regulators to more closely monitor the fulfillment of obligations to the Russian side.
Now the implementation of joint nuclear cooperation projects with India is becoming more politically (not so much economically) significant for Russia than before, allowing the countries to jointly shape some elements of the changing international agenda, the contours of a new multipolar world, Evgeny Smirnov, Doctor of Economics, Professor, Head of the Department of World Economy and International Economic Relations at the State University of Management, told Izvestia.
- Therefore, Russia will continue to give preferential treatment in cooperation with India, as it did with the discount on export prices for Russian oil or as it is now with the restructuring of loans. Indian companies have ambitions to acquire stakes in Russian oil and gas companies, including those operating in the Arctic. On the whole, the deepening of economic cooperation between Russia and India has significantly contributed to reducing our country's isolation from the West," he said.
The Energy Ministry refrained from commenting, noting that the topic is outside the agency's area of responsibility. The Ministry of Industry and Trade redirected Izvestia's inquiry to Rosatom, but at the time of publication no response had been received.
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