India’s trade with Russia has not yet been severely impacted by the rising tensions in the border region of Russia and Ukraine, but there is looming prospect that it could be impacted if wider sanctions on Russia are announced.
GS II- International Relations
Dimensions of the Article:
- What is the impact on Indian exports?
- India–Russia relations
What is the impact on Indian exports?
- Russia is India’s 25th largest trading partner with exports of $2.5 billion and imports of $6.9 billion in the first nine months of FY2022.
- India’s key exports to Russia include mobile phones and pharmaceuticals while India’s key imports from Russia are crude oil, coal and diamonds. Tea is a major export item from India.
- India’s exports to Ukraine were about $372 million in the April-December period led by pharmaceuticals and mobile phones, while imports worth about $2.0 billion are dominated by sunflower oil and urea.
- Together exports to both countries accounted for under one per cent of India’s exports in the first three quarters of this fiscal.
Impact of Sanctions on Russia:
- Sanctions on Russian exports including crude oil are seen as unlikely by exports as crude oil prices are already at an eight-year high and crossed the $100 per barrel threshold.
- Experts noted that exporters are delaying execution of orders from both countries over concerns that shipments may be stuck during a conflict.
- Exporters are also delaying execution of orders if they have a timeline which allows them to supply later
- A top executive at a pharmaceutical company said that cargo insurance was not available for shipments to Ukraine, noting, “exporters will have to make their own decision on supply keeping in mind the risk of goods getting stuck.”
- Another top executive at a leading Indian pharmaceuticals company with large exports to both Russia and the Ukraine said currently there was no issue in exporting goods to either country.
- During the Cold War, India and the Soviet Union (USSR) had a strong strategic, military, economic and diplomatic relationship and after the Dissolution of the Soviet Union, Russia inherited its close relationship with India.
- Traditionally, the Indo-Russian strategic partnership has been built on five major components: politics, defence, civil nuclear energy, anti-terrorism co-operation and space – and in recent years a sixth, economic component has grown in importance, with both countries setting a target of reaching US$30 billion in bilateral trade by 2025.
- Both countries are members of many international bodies like UN, BRICS, G20 and SCO where they collaborate closely on matters of shared national interest.
- Russia has stated publicly that it supports India receiving a permanent seat on the United Nations Security Council.
- India is the second largest market for the Russian defence industry and Russia the chief supplier of defence equipment for India (Russia almost 70%, USA around 15% and Israel around 8% as of 2016).
- India and Russia have deepened their Make in India defence manufacturing cooperation by signing agreements for the construction (including Joint Ventures) of naval frigates, KA-226T twin-engine utility helicopters, Brahmos cruise missile.
- The defence co-operation is not limited to a buyer-seller relationship but includes joint research and development, training, service to service contacts, including joint exercises
Both India and Russia have jointly developed an economic strategy that involves using a number of economic components to increase future bilateral trade – which include:
- development of an FTA between India & the EEU,
- a bilateral treaty on the promotion and protection of investments,
- a new economic planning mechanism built into IRIGC,
- simplification of customs procedures,
- new long-term agreements in the expansion of energy trade including nuclear, oil and gas
- long term supplier contracts in key sectors such as oil, gas and rough diamonds etc.
Major commodities exported from Russia to India are: Gems & precious metals, Machines & engines, Electronic equipment, Fertilizers, Medical & technical equipment, Oil etc.
Major commodities exported from India to Russia are: Pharmaceuticals, Electronic equipment, Iron and steel, Clothing, Coffee, tea and spices, Tobacco etc.
-Source: Indian Express