India-Russia Trade | 25 Oct 2022

Why in News?

Recently, the Ministry of Commerce and Industry has released data showing that India’s bilateral trade with Russia has soared to an all-time high of USD 18,229.03 million in just five months (April-August) of FY 2022-23.

What are the Findings?

• Overview:
  • The total annual bilateral trade between the two countries stood at USD 13,124.68 million in 2021-22, and USD 8,141.26 million in 2020-21.
    • Pre-Covid, it was USD 10,110.68 million in 2019-20, USD 8,229.91 million in 2018-19, and USD 10,686.85 million in 2017-18.
  • Russia has now become India’s seventh biggest trading partner — up from its 25th position last year.
    • The US, China, UAE, Saudi Arabia, Iraq and Indonesia were the six countries which recorded higher volumes of trade with India during the first five months of 2022-23.
  • Of the total USD 18,229.03, India’s imports from Russia accounted for USD 17,236.29 million, while India’s exports to Moscow were only worth USD 992.73 million, leaving a negative trade balance of USD 16,243.56 million.
  • An analysis of the data shows that 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.
• Drivers:
  • It is mainly due to a sudden jump in imports from Russia, mainly oil and fertilisers, which began to surge earlier in 2022.
    • There was an over 500% increase in three months – 561.1% in June, 577.63% in July and 642.68% in August – as compared to the same months of the previous year.
  • Petroleum oil and other fuel items (mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes) accounted for 84% of India’s total imports from Russia.
  • Fertilizers were second, fertilisers and fuel together account for over 91% of the total imports from Russia this year.

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:
  • In 2019, Russia signed the Executive Order on awarding PM Narendra Modi Russia’s highest state decoration – The order of St Andrew the Apostle. The order was presented to PM for his distinguished contribution to the development of a privileged strategic partnership between Russia and India and friendly ties between the Russian and Indian peoples
  • 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.
• Trade Relations:
  • The two countries intend to increase bilateral investment to USD 50 billion and bilateral trade to USD 30 billion by 2025.

• Defence and Security Relations:
  • Both countries regularly conduct the Tri-Services exercise ‘INDRA‘.
  • The joint military programmes between India and Russia include:
    • BrahMos cruise missile programme
    • 5th generation fighter jet programme
    • Sukhoi Su-30MKI programme
    • Ilyushin/HAL Tactical Transport Aircraft
    • KA-226T twin-engine utility helicopters
    • some frigates
  • The military hardware purchased/leased by India from Russia includes:
    • S-400 Triumf
    • Kamov Ka-226 200 to be made in India under the Make in India initiative
    • T-90S Bhishma
    • INS Vikramaditya aircraft carrier programme.
• Nuclear Relations:
  • 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.

What is the Significance of Russia for India?

• Balancing China:
  • The Chinese aggression in the border areas of eastern Ladakh, brought India-China relations to an inflection point, but also demonstrated that Russia can contribute to defusing tensions with China.
  • Russia organized a trilateral meeting among the foreign ministers of Russia, India, and China following deadly clashes in the Galwan Valley in the disputed territory of Ladakh.
• Emerging New Sectors of Economic Engagement:
  • Apart from traditional areas of cooperation such as weapons, hydrocarbons, nuclear energy, and diamonds, new sectors of economic engagement are likely to emerge — mining, agro-industrial, and high technology, including robotics, nanotech, and biotech.
  • India’s footprint in the Russian Far East and in the Arctic is set to expand. Connectivity projects may get a boost too.
• Combating Terrorism:
  • India and Russia are working to close the gap on Afghanistan and are calling for early finalization of the Comprehensive Convention on International Terrorism.
• Support At Multilateral Forums:
  • Additionally, Russia supports India’s candidacy for permanent membership of a reformed United Nations Security Council and of the Nuclear Suppliers Group.
• Russia’s Military Exports:
  • Russia has been one of the largest arms exporters to India. Even as Russia’s share in India’s arms imports fell by over 50% in the last five-year period compared to the previous five years (2011–2015).
  • In the last 20 years, India imported arms and weapons worth USD 35 billion from Russia, according to the Stockholm International Peace Research Institute which tracks global arms trade.

Way Forward

• Russia will remain a key defense partner for India for decades to come.
• On the other hand, Russia and China are currently in a quasi-alliance setup. Russia repeatedly reiterates that it does not see itself as anybody’s junior partner. That’s why Russia wants India to act as a balancer.
• The two countries have been discussing how they can cooperate in using India as a production base for exporting to third countries Russian-origin equipment and services.
  • To address this, Russia has made legislative changes allowing its companies to set up joint ventures in India to address it following an Inter-Governmental Agreement signed in 2019.
  • This agreement needs to be implemented in a time bound manner.

Source: IE