India and Russia have shared a historically strong partnership, and in recent years, their economic ties have expanded rapidly, particularly in areas such as energy, defense, and technology. With a shared goal of bolstering trade, both nations aim for $100 billion in bilateral commerce well before the initial target date 2030. However, the path to this ambitious goal is complex, with payment, logistics, and trade imbalances challenges. In a recent meeting, India’s External Affairs Minister, S. Jaishankar, and Russia’s First Deputy Prime Minister, Denis Manturov, discussed strategies to overcome these hurdles, diversify trade, and leverage mutual strengths.
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Current Trade Scenario and Achievements
India and Russia’s trade relationship has witnessed remarkable growth in recent years, with the trade volume currently estimated at $66 billion. Since 2022, India has ramped up its imports of Russian crude, which has contributed to a trade imbalance with a $57 billion trade deficit for India. Russia’s emergence as India’s second-largest trading partner is a testament to the rapid evolution of this partnership, despite the challenges posed by sanctions and geopolitical dynamics.
Manturov pointed out that bilateral trade grew by 9% in the first eight months of 2024, and over the past five years, it has expanded more than five-fold. The progress is partly attributed to Russia’s increased imports of Indian agricultural products, industrial equipment, pharmaceutical drugs, and other goods. Both countries have shown commitment to resolving logistical and payment-related issues to ensure continued growth and balance in their trade relations.
The Trade Imbalance: Addressing India’s Concerns
A significant area of focus is the trade imbalance between India and Russia, with India’s deficit largely due to crude oil imports. Jaishankar, speaking at the India-Russia Business Forum in Mumbai, highlighted the need to address this imbalance, emphasizing that balanced trade is critical for sustainable growth. To tackle this issue, India and Russia are aiming to diversify their trade basket to reduce dependency on oil and energy imports.
Jaishankar noted that India seeks greater facilitation efforts to make trade easier, alongside advancements in negotiations for a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU). The FTA, if realized, could provide India with improved market access, reduce tariffs, and make Indian goods more competitive in the Russian market.
Payment and Logistics Challenges
One of the primary challenges in India-Russia trade is managing payments and logistics, especially given Western sanctions on Russia. While progress has been made, both countries recognize that further efforts are needed to simplify trade processes and resolve issues in these areas. The sanctions have complicated international transactions for Russia, often leading to delays and increased costs.
To circumvent these obstacles, India and Russia have explored alternatives to traditional payment systems. Manturov mentioned that nearly 90% of trade between the two nations is now settled in local and alternative currencies, which has reduced dependence on global financial systems and minimized the impact of sanctions. Expanding the network of Indian and Russian banks involved in these transactions could further streamline the payment process, ensuring that trade flows smoothly.
Strengthening Transportation Links and Connectivity
Enhanced connectivity is essential for bolstering trade, and both nations are working to improve transport links. Currently, Russia’s Aeroflot is the sole airline operating direct flights, with 12 weekly flights connecting Moscow and Ekaterinburg to New Delhi and Goa. Manturov expressed a desire to expand the number of direct flights to improve people-to-people and business interactions.
Beyond air travel, the International North-South Transport Corridor (INSTC) is a critical infrastructure project linking India, Iran, and Russia, offering a more efficient route for trade between South Asia, Central Asia, and Europe. The development of this corridor could significantly reduce transportation costs and time for goods traded between India and Russia, further fueling growth in bilateral commerce.
Exploring New Avenues of Economic Cooperation
At the core of their economic cooperation is the mutual recognition of complementary strengths. India and Russia are focusing on areas such as hydrocarbons, nuclear energy, agriculture, healthcare, information technology, and pharmaceuticals. The two countries have already made strides in expanding their trade basket beyond oil, and with a new economic program in the works, they are looking to broaden their areas of cooperation.
Agricultural products from India, which have high demand in Russia, are expected to become a larger part of the trade mix. Similarly, India’s expertise in pharmaceuticals and information technology offers avenues for Russia to import high-quality products and services. The healthcare sector, especially medical tourism, presents another promising area for growth, as India is a popular destination for affordable medical treatments.
Additionally, cooperation in education and technology is being prioritized, as both countries seek to build on their scientific and technical expertise. Initiatives like student exchange programs, joint research projects, and collaboration between educational institutions can foster closer ties between Indian and Russian youth, ensuring the continuation of the partnership into future generations.
Progress Toward a Free Trade Agreement
One of the most ambitious goals discussed is the finalization of a Free Trade Agreement between India and the Eurasian Economic Union (EAEU), which includes Russia and four other post-Soviet states. The proposed FTA is expected to provide preferential access to Indian goods and services in the Russian market, enhance competition, and make Indian exports more attractive in Russia.
Manturov reaffirmed Russia’s commitment to this FTA, which could unlock new trade opportunities, particularly for small and medium enterprises in India. Such an agreement would likely lower tariffs and create streamlined processes for the movement of goods and services. The FTA is seen as a crucial step in achieving the $100 billion trade target, as it would directly address many of the current constraints in the bilateral trade relationship.
Vision 2030: Economic Cooperation Program
The latest meeting between Jaishankar and Manturov directed various working groups under the Intergovernmental Commission on Trade, Economic, Scientific, Technical, and Cultural Cooperation (IGC-TEC) to accelerate the completion of the economic cooperation program through 2030. These groups, consisting of 14 working groups and six sub-groups, are responsible for fast-tracking initiatives across various sectors, including investments, in energy, science and technology, pharmaceuticals, IT, nuclear energy, and connectivity.
The economic cooperation program is designed to support India and Russia’s shared vision for trade expansion, balanced economic ties, and increased collaboration across multiple sectors. This structured approach aims to address current constraints while providing a roadmap for both countries to reach their shared trade goals.
The Road Ahead
India and Russia’s trade ambitions reflect a deep-rooted partnership built on mutual respect, trust, and strategic alignment. Achieving the $100 billion trade target will require sustained efforts, addressing trade imbalances, overcoming logistical hurdles, and fostering diversified commerce. The willingness of both countries to adapt and innovate has already led to promising progress, with nearly 90% of trade conducted through local currencies and a trade volume of $66 billion within reach of the $100 billion goal.
The establishment of a free trade agreement with the Eurasian Economic Union, coupled with the ongoing expansion of trade avenues, positions India and Russia to achieve their vision for 2030 ahead of schedule. The strategic decisions made by Jaishankar, Manturov, and their respective teams will not only help balance trade but also ensure a long-lasting economic relationship that reflects the true potential of India-Russia partnership in a rapidly evolving global landscape.