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International Relations

Russia-India Bilateral Trade

  • 20 Apr 2023
  • 7 min read

For Prelims: Russia-India Inter-Governmental Commission Meeting, Trade Imbalance, Oil, Fertilizers, Indo-Pacific region.

For Mains: Russia-India Bilateral Trade.

Why in News?

Recently, Russia's Deputy Prime Minister has attended the 24th Russia-India Inter-Governmental Commission (IGC) meeting in India.

  • Russia has expressed its interest in importing manufacturing equipment, including machinery, from India to replace those of Western origin.

What are the Key Highlights of the Meeting?

  • Both countries reviewed the defense cooperation between India and Russia, which has been facing challenges related to deliveries and payments due to the ongoing war in Ukraine.
  • The two countries discussed the plans that India has for Russia's far eastern region, which is an essential part of Russia's strategy in the Indo-Pacific region.
  • They held discussions on bilateral trade efforts and the identification of new industrial points that would provide additional impetus for trade between the two countries.
    • Balance of trade currently tilts in favor of Russia, and hence, the two sides discussed ways to bring more balance in trade relations.
  • Both sides also discussed a wide range of issues related to bilateral trade, economic, and humanitarian cooperation.
    • These discussions covered many areas of mutual interest, including those related to technology, energy, healthcare, and education.

What is the Status of India-Russia Trade Ties?

  • India's total bilateral trade with Russia stood at ~USD 13 Billion in 2021-22 and USD 8.14 Billion in 2020-21.
  • Russia is India’s seventh biggest trading partner, up from 25th position in 2021.
    • The US, China, UAE, Saudi Arabia, Iraq, and Indonesia were the six countries that recorded higher volumes of trade with India during the first five months of 2022-23.

What are the Concerns Related to Bilateral Trade?

  • Trade Imbalance:
    • India's Imports from Russia accounted for USD 17.23 Billion, while India's exports to Moscow were only worth USD 992.73 million, resulting in a negative trade balance of USD 16.24 Billion in 2020-21.
    • Russia's share in India's total trade has increased to 3.54%, up from 1.27% in 2021-22.
    • While Russia's share in India's total trade was 2.1% in 1997-98, it has hovered below 2% for the last 25 years.
  • Factors Causing Trade Imbalance:
    • The sudden jump in imports from Russia, mainly oil and fertilizers, which began to surge earlier in 2022, is the main driver behind this increase in bilateral trade.
    • Together, fertilizers and fuel accounted for over 91% of the total imports from Russia this year.

How can Trade Imbalance Between Russia and India be Addressed?

  • Indian Export to Russia:
    • Both the countries are looking to increase Indian imports, particularly in the machinery sector, where India has advanced production capabilities.
  • Rupee-Ruble Mechanism:
    • One of the challenges facing the trade relationship is payments, logistics, and certifications. Both sides are in talks to resort to the Rupee-Ruble mechanism to safeguard bilateral trade from the impact of western sanctions.
  • New Industrial Points:
    • Both are looking to identify new industrial points that can give additional impetus for trade, and to negotiate a Free Trade Agreement.

What are the Different Aspects of Indo-Russia Relations?

  • Historical Background:
    • During the Cold War, India and the Soviet Union had a strong strategic, military, economic and diplomatic relationship. After the Dissolution of the Soviet Union, Russia inherited its close relationship with India which resulted in both nations sharing a Special Strategic Relation.
    • However, the relations have taken a steep downfall over the past few years, especially in the post-Covid scenario. One of the biggest causes for this is Russia’s close relations with China and Pakistan, which have caused many geopolitical issues in the past few years for India.
  • Political Relations:
    • Two Inter-Governmental Commissions – one on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC-TEC), and another on Military-Technical Cooperation (IRIGC- MTC), meet annually.
  • Defence and Security Relations:
  • Nuclear Energy:
    • Kudankulam Nuclear Power Plant (KKNPP) is being constructed within the scope of the Russia-India Inter-Governmental Agreement.
    • Both India and Russia are implementing Rooppur Nuclear Power Project in Bangladesh.

Conclusion

  • A multi-pronged approach that focuses on diversification, promotion of exports, negotiation of better trade deals, expansion of economic cooperation, and addressing structural issues can help address the trade imbalance between India and Russia.

UPSC Civil Services Examination Previous Year Question (PYQ)

Prelims

Q. Recently, India signed a deal known as ‘Action Plan for Prioritization and Implementation of Cooperation Areas in the Nuclear Field’ with which of the following countries? (2019)

(a) Japan
(b) Russia
(c) The United Kingdom
(d) The United States of America

Ans: (b)


Mains

Q. What is the significance of Indo-US defence deals over Indo-Russian defence deals? Discuss with reference to stability in the Indo-Pacific region. (2020)

Source: TH

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