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Monday, May 20, 2013

Will Iran come to the rescue of the beleaguered Indian auto industry? It might well be the case. As per an article in the Economic Times, Iran has agreed to source automobiles and pharmaceuticals from India. This is in exchange for payment of oil imports.

Prior to this, the trade balance was considerably skewed towards Iran. So while India exported goods worth US$ 3.4 bn in FY13, imports were much higher at US$ 11.6 bn. That is not all. India has also been having problems making dollar payments to Iran. This is on account of the sanctions imposed on the latter by the developed world. Hence, this form of barter appears to have found favour among both.

For Iran too, this is beneficial because so far they had been importing automobiles from the European Union (EU). Automobiles and pharmaceuticals were two of the bigger components of the export basket adding upto US$ 18.4 bn and US$ 14.6 bn respectively in FY13. How big an opportunity it is for the Indian auto and pharma industry remains to be seen.  

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