Background and Current Status
India is on track to achieve a substantial milestone in its economic ties with Russia, with the External Affairs Minister S. Jaishankar expressing confidence in reaching a $100 billion trade target well ahead of the originally set date of 2030. This ambitious goal is a component of ongoing efforts to enhance the bilateral relationship, which has already seen impressive growth in trade over recent years. According to Russia’s First Deputy Prime Minister Denis Manturov, two-way trade between the two nations has increased more than five-fold in the last five years, underscoring a significant shift in economic cooperation.
Addressing Trade Imbalances
Despite the remarkable growth, there are ongoing concerns regarding the trade imbalance between the two countries. Currently, India faces a trade deficit of approximately $57 billion with Russia, primarily driven by substantial imports of Russian crude oil since 2022. Minister Jaishankar acknowledged the need to address these disparities during his opening remarks at the Intergovernmental Commission on Trade, Economic, Scientific, Technical, and Cultural Cooperation (IGC-TEC) meeting. He called for a more balanced trade approach, emphasizing the importance of addressing existing constraints and enhancing facilitative efforts to make trade more effortless.
In discussions at the India-Russia Business Forum, Jaishankar noted that while the growth in bilateral trade—currently estimated at $66 billion—is commendable, it is essential to renegotiate the terms to ensure that trade becomes more equitable. He suggested that the ongoing negotiations concerning the Free Trade Agreement (FTA) with the Eurasian Economic Union are crucial in achieving this goal.
Progress and Challenges
Jaishankar highlighted that progress has been made in overcoming some challenges to trade, notably in the areas of payments and logistics. Although Western sanctions imposed on Russia have complicated matters, both sides have made “perceptible progress” in addressing these issues. Amid these changes, Jaishankar pointed out that there remains “still some work to be done” to streamline processes further and facilitate a more balanced trade relationship.
Manturov echoed Jaishankar’s sentiments, reporting a 9% increase in trade during the first eight months of 2024 alone. He affirmed the importance of diversifying the trade basket to enhance the scope of bilateral cooperation. Currently, India holds the position of being Russia’s second-largest trade partner, with mutual imports including Indian agricultural products, industrial equipment, components, and pharmaceuticals.
Future Prospects and Cooperative Initiatives
Both Jaishankar and Manturov laid out plans to expand the trade framework and reduce imbalances as part of the program for economic cooperation leading up to 2030. Manturov expressed Russia’s commitment to finalizing the FTA with India and establishing bilateral agreements on services and investments.
Crucially, there has been progress in settling trade in local and alternative currencies, with the figure now approaching 90%. Manturov stressed the need to continue fostering relationships between Indian and Russian banking systems. Additionally, he called for more direct flights between the two countries, noting that only Aeroflot currently operates 12 flights weekly between Moscow and destinations in India, such as New Delhi and Goa.
Collaborative Framework for Economic Cooperation
Jaishankar and Manturov jointly directed 14 working groups and six sub-groups under the IGC-TEC to expedite the finalization of the economic cooperation program aimed at achieving the $100 billion trade target. Among the critical sectors discussed during the IGC-TEC meeting were trade, investments, hydrocarbons, nuclear energy, connectivity, agriculture, science and technology, information technology, pharmaceuticals, healthcare, fertilizers, and education.
Financial Framework and High-Level Meetings
In a parallel development, Finance Minister Nirmala Sitharaman engaged with Denis Manturov, discussing key measures to bolster the financial and economic collaboration between India and Russia. Following their discussions, the Finance Ministry released a statement on social media platform X, indicating a mutual interest in strengthening bilateral ties in both bilateral and multilateral arenas.
Furthermore, Manturov also met with Prime Minister Narendra Modi. During their conversation, both leaders explored possibilities for enhancing cooperation across a variety of sectors, including trade and economic exchanges, energy initiatives, and connectivity. Prime Minister Modi remarked on the sustained collective efforts from both sides to implement decisions made during his recent visits and meetings with Russian President Vladimir Putin, aiming to further consolidate the India-Russia Special and Privileged Strategic Partnership.
Conclusion
As India and Russia embark on this journey toward robust trade relations, the outlook seems promising. With ongoing efforts to tackle challenges and enhance cooperation across multiple sectors, the two nations are paving the way toward achieving their ambitious goal of $100 billion in trade—a feat that could potentially be accomplished even before the year 2030.
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