Sansad TV Perspective: India and Russia Trade Relations

In the series Sansad TV Perspective, we bring you an analysis of the discussion featured on the insightful programme ‘Perspective’ on Sansad TV, on various important topics affecting India and also the world. This analysis will help you immensely for the IAS exam, especially the mains exam, where a well-rounded understanding of topics is a prerequisite for writing answers that fetch good marks.

In this article, we feature the discussion on the topic: ‘India and Russia Trade Relations‘.

Anchor: Teena Jha

Participants: 

• Alok Bansal, Director, India Foundation
• Prof. Manoj Pant, Former Vice Chancellor, IIFT (Indian Institute of Foreign Trade)
• S. R. Tayal, Former Ambassador

Context: India and Russia are about to enter into a new bilateral investment treaty.

Details: 

• The India-Russia Business Dialogue was held with the participation of major businesses from both sides which enabled the business leaders to engage and drive the momentum of shared priorities of deeper and wider bilateral commercial cooperation.
• The annual bilateral trade between India and Russia has gone up to $45 billion this year, driven largely by India’s increased purchases of Russian crude.
  • India’s imports from Russia more than quadrupled to $46.33 billion over the last fiscal year, mainly through oil.
  • India’s trade deficit with Russia jumped significantly in the last few months after it procured significant volumes of discounted crude oil. 

Image: India-Russia trade

Source: Indian Express

• India and Russia have agreed to work towards unlocking the full potential of their economic engagement including addressing the trade deficit and market access.
• The bilateral trade target of USD 30 billion has been crossed much before the target year of 2025, adding the trade volume was about USD 45 billion for the period April 2022 to February 2023.

Image: India’s import of oil

Source: Indian Express

Concerns with respect to trade: 

• India is required to make payments in ruble terms and that is presenting many challenges. 
  • Payment in rubles is also a challenge because there is no fixed exchange rate for the currency, Bharat Petroleum Corp. Ltd. refiners would rather pay in the United Arab Emirates dirham which is pegged to the dollar.
  • India’s biggest company by market value Reliance Industries Ltd. and BPCL are among Indian refiners using dirhams to pay for some shipments of Russian crude as they navigate Western sanctions.
• India’s imports from Russia climbed more than 400% in eight months to November from a year earlier, while exports fell 14%. This led to a widening trade imbalance between the two countries in recent times. India’s trade deficit with Russia grows sevenfold to $34.79 billion. 
• The Western nations have put sanctions on Russia and India’s regular defying of sanctions is seen with animosity by them. This could potentially challenge India’s relations with Western countries. 
• Slow progress in the rupee trade with Russia could add more pressure on the local currency which slipped the most against the dollar among emerging Asian currencies in the past 12 months.

Steps to correct the trade imbalance: 

• Russia has promised to buy some machines and other equipment in order to reduce the trade imbalance. 
• There is an agreement in terms of the export of consumer goods from India to Russia in order to reduce the trade imbalance. 
  • Russia to buy goods like electronics so that the rupee trade mechanism can be brought back on track.
• Both countries have agreed upon finding a solution to the imbalance by addressing the impediments such as market access issues, non-tariff barriers and those relating to payments or logistics.

Bilateral Investment Treaty (BIT): 

• India and Russia are working on firming up a bilateral agreement for the promotion and protection of investments and looking at expanding trade ties. 
• The BIT seeks to protect the investment of both countries in their respective countries and provide a level playing ground to the companies working in each other’s jurisdiction. \

India and Russia’s relationship is time-tested and resolute. This is a challenging time and good bilateral relations between the two countries can take us out of a challenging situation. 

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