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Russia – India

May 29, 19:34 UTC+3
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Despite the declining bilateral trade in recent years, Russia and India remain stable economic partners. Today, the countries are trying to ramp up their bilateral relations – setting up joint ventures, diversifying trade, and developing transportation connections. New opportunities can also be found in the Make in India programme.

For decades, Russia and India have been bound by a wide range of bilateral relations.

  • India is Russia’s key partner in the defense industry. The portfolio of India’s defense orders amounted to USD 4.6 billion in 2016 and is expected to grow further in 2017, following the new agreements signed at Aero India 2017 in February and at a Russian-Indian military and industrial conference in New Delhi in March.
  • ROSATOM and India’s Department of Atomic Energy have been working together to build the Kudankulam Nuclear Power Plant for 20 years. The commissioning of the second unit is scheduled for 2020–2021, and the investment in the project has already reached USD 10 billion. In October 2016, ROSATOM and Hindustan Agro signed an agreement on the sidelines of the BRICS forum in New Delhi to develop a chain of integrated irradiation sterilisation centres in India.
  • India’s ONGC is an investor of the Sakhalin-1 offshore oil project.
  • India is also Russia’s third biggest supplier of medications after Germany and France.
  • Russian Railways and the Indian Ministry of Railways are jointly developing the High-Speed Railways programme, which envisages construction and electrification of 400 km of railways in India.

India’s investments in the Russian economy (over USD 8 billion) are concentrated in the oil and gas and pharmaceutical sectors. Russia has so far invested USD 4 billion in India, mainly in nuclear energy, technology and transportation.

Make in India, a new industrialisation programme announced by Indian Prime Minister Narendra Modi, has created new prospects for Russian-Indian cooperation.

The main focus areas for its development were outlined at a meeting between Russian President Vladimir Putin and Narendra Modi at the BRICS summit in October 2016:

  • Cooperation in the defense industry

In 2016, the two countries already launched joint manufacturing of Su-30MKI fighter jets, T-90 tanks and anti-ship missiles. Agreements were reached to supply S-400 anti-aircraft missile systems, build frigates for the Indian Navy and establish a joint venture for manufacturing of Ka-226T helicopters (in 2017, the project is actively underway).

  • Space cooperation

Russia and India will jointly design carrier rockets, and develop satellite navigation and applied space technology.

  • Investment and economic cooperation

Vladimir Putin has announced the establishment of a joint Russian-Indian Fund (to which the parties committed USD 500 million each). Its goal is to finance selected investment projects in infrastructure, construction and innovations. According to the President, a total of 20 large projects in these sectors have already been agreed upon.

  • Rosneft and Gazprom are teaming up with Indian companies to develop offshore projects in the Arctic. Zarubezhneft plans to participate in the development of Indian fields.
  • Talks are in progress on licensed production of the Sukhoi Superjet aircraft in India and joint design of a regional passenger aircraft.

Development of the partnership is hindered by some issues in bilateral trade.

  • Back in December 2014, the two countries’ leaders set the goal of increasing the volume of bilateral trade three-fold, to RUB 30 billion by 2025. However, it has been declining steadily since then. The trade volume in 2016 totalled USD 7.71 billion (down 1.5% from 2015).

The key problems are:

  • Absence of a convenient transportation route. The prospects of resolving it are linked to the development of the North–South International Corridor (the first shipment was made in October 2016). The establishment of free trade zones of the Eurasian Economic Union (EAEU) expected in 2018 will also help to optimise the logistics.
  • Insufficient use of national currencies in bilateral trade. The countries are currently developing plans to transition to settlements in their currencies. Besides, Russia hopes that VTB’s and Sberbank’s offers on financing trade transactions in India will become more popular.
  • Underinvolvement of small and medium-sized businesses in cooperation. It will be improved with the opening of the Trading House (a branch of the Russian Export Center) in India, which will function as a one-stop shop.
  • Trade restrictions introduced by India. Out of 138 restrictions in place globally with regard to goods from the Eurasian Economic Union, 13 come from India. The situation may change if a free trade zone is established between the EAEU and India. Negotiations are already underway.
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