Russia has been a long standing, significant partner of India and the relationship with Russia forms a cornerstone of India’s foreign policy. Russia has assisted India in major development projects such as the multipurpose dam at Bhakra Nangal, the steel plant at Bhilai and IIT Mumbai.
India’s engagement with Russia now extends to all areas of bilateral cooperation including defence, education, trade and economy, energy and science and technology.
India-Russia trade ties acquired greater significance in 2000 with the signing of “Declaration on the India-Russia Strategic Partnership”, during the visit of Russian President, HE Mr Vladimir Putin to India. The “Strategic Partnership” was elevated to the level of “Special and Privileged Strategic Partnership” during the visit of the Russian President to India in 2010. Druzhba-Dosti was signed by Prime Minister Shri Narendra Modi and President Putin in December 2014, a vision for the next ten years.
Under the Strategic Partnership, annual summits between the Prime Minister of India and the Russian President take place regularly, with a view to strengthen the India-Russia partnership further. So far, seventeen annual summits have taken place in India and Russia. The most recent summit was held in Goa in October, 2016, where Prime Minister Modi and President Putin adopted a Joint Statement, “Partnership for Global Peace and Stability” which resulted in 19 cooperation agreements in areas including defence, space, trade and investment, hydrocarbons and railways.
India-Russia Trade in Last Ten Years
Historically, India and Russia have been strong trading partners. However, over the last five years, India’s total trade with Russia remained fairly constant at around US$ 6 billion. In 2016-17, total trade went up to US$ 7.5 billion, registering an impressive growth rate of 22 per cent.
India’s exports to Russia have increased from US$ 0.94 billion in 2007-08 to US$ 1.9 billion in 2016-17 (Figure 1). Indian exports peaked during 2012-13, with total value of exports at US$ 2.3 billion. On the other hand, Indian imports from Russia increased from US$ 2.5 billion in 2007-08 to US$ 5.7 billion in 2016-17.
Figure 1: India’s Trade with Russia (in US$ Millions)
Major Exports and Imports
India’s trade basket with Russia is well diversified. In April-Feb 2016-17, among India’s top imports from Russia, gems and jewellery (HS Code 71) occupied the leading position, accounting for 45.4 per cent of the total. The other major imports included petroleum products, fertilisers, iron and steel and paper products. The category wise percentage shares of key imports are given below (Figure 2).
Figure 2: India’s Major Imports from Russia as % of Total Indian Imports from Russia
In the same year, the top Indian export to Russia was pharmaceutical products (HS Code 30), accounting for 18 per cent of the total Indian exports to Russia. Other key exports included machinery and parts, beverages and spices, aircrafts and parts and organic chemicals. The category wise percentage shares of key exports are given below (Figure 3).
Figure 3: India’s Major Exports to Russia as % of Total Indian Exports to Russia
The two countries are involved in numerous projects and bilateral investments. The historic joint venture between the two countries, resulted in the world-class supersonic cruise missile, BrahMos, for which each side made equal contributions amounting to a total of US$ 300 million. Another recent collaboration between the two has been India’s newest and largest aircraft carrier, INS Vikramaditya, which was commissioned into the Indian Navy in November 2013.
In the energy sector, India is keen to secure long-term supplies of hydrocarbons from Russia. The two countries plan to jointly build nuclear power units in Kudankulam, with units 1 and 2 completed and agreements for units 5 and 6 underway.
Russia’s cumulative investments to India stood at US$ 1.2 billion for the period 2000-2017. Russia’s state controlled oil giant Rosneft and its partners acquired India’s second largest oil major Essar Oil for US$ 12.9 billion. Besides being India’s most important defence partner, Russia also extends support to India for setting up of nuclear reactors.
India’s total investments in Russia, as of December 2016, are estimated to be around US$ 13 billion. In recent years, Indian companies have actively invested in Russia’s oil and gas sectors. Several Indian oil majors acquired stakes in Rosneft’s oilfields. In October 2016, ONGC Videsh Limited (OVL) completed the acquisition of an additional 11 per cent stake in the Vankor oilfield for $930 million, over and above the previously acquired 15 per cent stake for $1.26 billion. This further propelled Indian investments in Russia significantly.
There is immense potential for the two countries to further enhance economic ties and move beyond a traditional buyer-seller relationship. It is important for India and Russia to significantly enhance the private sector engagement of their industry sectors, and also to establish partnerships for technology transfer and joint ventures in defense and nuclear energy components.
Green Corridor, International North South Transport Corridor and India EAEU FTA could add to trade and investments. CII has called for early implementation of these.
Infrastructure: Russia could invest in Delhi-Mumbai Industrial Corridor, Smart Cities, railways, public transport, urban rail, sanitation and low cost housing. Similarly, Indian companies should invest in Russian industrial parks in sectors of their interest.
ICT: Russia can be a valuable market in the Information Technology and services sector, considering IT and services are India’s largest services exports. Indian companies may also explore links with Russian companies in software for the manufacturing sector.
Pharmaceuticals: India’s pharma exports to Russia constitute a sizable chunk of its total exports. Possibilities of joint investments are being considered by the leading Indian Pharma Companies under Russia’s Pharma 2020 programme.
Defence manufacturing: Russia is a primary source of defence equipment for India. Plenty of opportunities have opened up for both countries with the opening of FDI in defence production in India. Russia may like to consider a dedicated industrial park for defence manufacturing under the new norms to supply parts to helicopters, nuclear reactors and solar panels.
Other areas of potential cooperation include fertilisers, gems and jewellery, and tourism.