INDIA - RUSSIA TRADE RELATIONS – INTERNATIONAL
News: India,
Russia agree to deepen trade and economic relations
What's in the news?
● During
the recently concluded meeting of the India-Russia
Intergovernmental Commission on Trade, Economic, Scientific, Technological, and
Cultural Cooperation (IRIGC-TEC), both countries agreed to work towards
unlocking the full potential of their economic engagement, including addressing
trade deficit and market access issues.
India Russia Trade Relations:
● Bilateral
trade between India and Russia touched $25 billion (2022) on account of
increased purchase of discounted oil from Russia.
● Bilateral
investments between the two countries reached US$30 billion in 2018.
Recent Outcomes:
1. Surge in trade:
● India and Russia hailed the surge in bilateral trade (up by 2.6 times in the past year, and at about $45 billion), surpassing the 2025 target.
2. Trade challenges:
● Both
sides noted the problem of trade imbalance, calling for more market access and the use of “national currencies” to circumvent
sanctions.
● Russian
Deputy Prime Minister, during the meet, suggested that Indian companies could
increase exports in road construction
and pharmaceuticals.
● India’s
External Affairs Minister said that Indian businesses should guard against
“over-compliance” when it comes to increasing trade with Russia, due to concerns over western sanctions.
3. Rising Trade deficit:
● The
rising dependence on discounted crude oil has resulted in India’s trade deficit with Russia hitting the second-highest place in
2022 after China.
● During
2022-23, India’s maximum trade deficit was with China at $71.58 billion. This
was followed by Russia, where the deficit expanded sevenfold - from $4.86
billion in FY22 to $34.79 billion in FY23.
4. Oil imports from Russia:
● India’s
imports from Russia have more than quadrupled to $46.33 billion over the last
fiscal year, mainly through oil.
● Russia, traditionally
India’s top source of military hardware, displaced Iraq last month to become
India’s top supplier of crude oil.
5. India-Russia FTA:
● India
and Russia are discussing a free trade agreement (FTA). This could deepen
bilateral commercial ties that have flourished since the war broke out in
Ukraine.
6. Free trade pact with Eurasian Economic Union
(EAEU):
● India’s
External Affairs Minister has said that a free trade agreement (FTA) with EAEU
- comprising five member states of
Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia will certainly deepen
the bilateral commercial relationship between India and Russia.
● Its
signing could catapult trade, which has been the laggard in bilateral ties
dominated by defence, nuclear and space cooperation.
Increased trade & Ukraine issue:
● While
the impetus in trade and the effort to balance imports and exports with Russia
are welcome, it is hard to ignore the circumstances surrounding these
developments.
● Since
Russia’s war in Ukraine began last year,
and western sanctions drastically cut Russian exports, Moscow has turned
increasingly to India and other countries including China that have not joined
the sanctions to export resources.
● India’s oil imports from
Russia (a negligible 0.2%), have jumped since the war to a massive 28% of its
total oil intake, contributing to trade as well as a
growing deficit.
India’s decision:
● When
the war with Ukraine broke out, many countries, including India, scrambled to
find trade alternatives for commodities Russia exported.
● India’s
decision on purchasing oil from Russia will continue to be guided by its energy security requirements.
● Heavy discounts offered
on Russian crude and fertilizers has compelled India
to maintain trade.
Global discomfort:
● India’s
decision to purchase discounted crude oil from Russia is triggering concern
among a number of Western powers.
● The
impression that New Delhi is “benefitting from the war” is gaining traction in
Western countries.
India’s Stand on Russia’s War with Ukraine:
● India’s
response to the Russian invasion of Ukraine has been distinctive among the
major democracies and among U.S. strategic partners.
● Despite
its discomfort with Moscow’s war, New Delhi has adopted studied public
neutrality toward Russia.
● It
has abstained from successive votes in
the UN Security Council, General Assembly, and Human Rights Council that
condemned Russian aggression in Ukraine and thus far has refused to openly call
out Russia as the instigator of the crisis.
● India
has been under immense indirect pressure from Western nations that have openly
condemned Russia’s military aggression against Ukraine.
● India
has been pressing for the resolution of
the crisis through diplomacy and dialogue.
Go back to basics:
IRIGC-TEC:
● India-Russia
Intergovernmental Commission on Trade, Economic, Scientific, Technological and
Cultural Cooperation (IRIGC-TEC) is the apex
G2G forum for bilateral economic cooperation.
● It
is chaired by the External Affairs
Minister from the Indian side and Deputy Prime Minister from the Russian
side.