INTERNATIONAL BUSINESS

India Russia Trade Relations

4/12/2022
MASTERS OF COMMERCE (IST SEMESTER)
FAZAKH PARVAIZ LONE
ROLL NO 72
INDIA’S TRADE POLICY OVERVIEW
1. The Seventh Trade Policy Review of India is taking place at a time when the world is witnessing
an unprecedented health crisis with the contagious COVID-19 hitting economies across the
world in rapid succession. Global growth has been severely affected and substantial risks of
more severe outcomes remain. In its June 2020 update, the International Monetary Fund (IMF)
has projected that global output would contract by 4.9% in 2020-21.1

2. After a brief period of moderation, the Indian economy had begun to regain momentum
towards the end of 2019 with the Index of Industrial Production (IIP) rebounding from negative
growth at the end of 2019 to 5.2% in February 2020, the highest level observed since July 2019.
The pandemic and the preventive country-wide lockdown in late March 2020 however affected
this revival, and has linked India's economic recovery to the containment of COVID-19, within its
own territory as well as globally.

3. During the period under review, the Government has focused on carrying out structural reforms
and ensuring inclusive growth. These reforms, along with a host of measures taken by the
government after the outbreak of COVID-19, should enable the country to bounce back on its
targeted growth path.

4. The fundamentals of the Indian economy are strong and this has ensured macroeconomic
stability. Inflation is within limits and FDI inflows have increased substantially in the recent years
with the highest ever FDI inflow of USD 74.39 billion during the financial year 2019-20.
Improvement in the trading environment has enabled the country to better its position in the
World Bank’s Doing Business ranking from 142 in 2015 to 63 in 2019.2 India’s position in the
Global Innovation Index has also risen from 81 in 2015 to 52 in 20193, while its ranking in World
Bank Logistics Performance Index changed from 54 in 2014 to 44 in 20184. These developments
clearly suggest an improved confidence of the global business and trade in the Indian economy.

5. The Government envisions that India would be a USD 5 trillion economy by 2024-25. The ability
to boost investments and an improved performance in trade would substantially contribute
towards the success of this endeavour. India’s low debt leverage, progress made in financial
inclusion and formalization of the economy can result in credit becoming a key contributor to
driving the economic growth. Infrastructure development is a cornerstone of the Indian growth
strategy, with its strong backward and forward linkages that can fuel the economy and improve
the competitiveness of the country. As a part of infrastructure development, India has launched
the National Infrastructure Pipeline on 31st December 2019 of ₹ 103 trillion (approx. USD 1.5
trillion). This initiative focuses on housing, access to clean and affordable energy, healthcare,
world class educational institutions, railways, logistics and warehousing. Strategic disinvestment
in public sector undertakings is aimed at further increase of private sector participation in the
economy, creating efficiencies and generating revenue, which will, in turn, enhance the capacity
of the Government to invest in developmental projects.

6. On the trade front, during the five-year period under review, exports grew at a compound
annual growth rate of 4.5%, while imports grew by 5.7%. India’s share in global exports and
 imports registered a marginal increase from 1.6% & 2.4% in 2015 to 1.7% & 2.5%, respectively,
in 2019. Total exports, inclusive of services, crossed half a trillion dollar mark for the first time to
reach a new high of USD 538.1 billion in 2018-19. This feat was repeated in 2019-20.

7. The period under review also saw the multilateral trading system face unprecedented
challenges. As a founding member of the WTO, India remained committed to the centrality of
the WTO for an integrated global trading system and was an active participant in the efforts to
safeguard and strengthen the WTO. In order to build a consensus towards this direction, India
took the initiative to host two informal mini-ministerial meetings in New Delhi, in March 2018
and May 2019. In almost all interventions, a need to preserve and enhance the functioning and
credibility of the rules-based multilateral trading system, which is transparent and inclusive,
with development as the core objective, was highlighted. During this period, India also
implemented India – ASEAN Services and
8. Investment Agreement and expanded the coverage of Asia Pacific Preferential Trade Agreement
(APTA).

9. India's total trade in goods (exports plus imports) as a percentage of GDP has shown an uneven
trend. After declining from 37% in 2015-16 to 36% in 2016-17, it showed a steady increase and
reached 41% in 2018-19 (Table 3). However, it declined to 37.8% during 2019-20. The slowdown
of world output has definitely had an impact on reducing the export to GDP ratio.

10. In 2019-20, the major commodity groups in India’s export basket in terms of percentage shares
were Chemical and Related Products (14.4%), Petroleum Crude and Products (13.2%), Gems and
Jewellery (11.5%), Textile and Allied Products (10.8%); Machinery and Electrical Appliances
(9.1%); Agriculture and Allied Products (8.4%); and Base Metals (7.6%).

Imports, exports, trade balance

Value in USD Billions
Year
Exports Growth% Imports Growth% Trade Balance

2015-16 262.3 -15.5 381.0 -14.9 -118.7

2016-17 275.9 5.2 384.4 0.9 -108.5

2017-18 303.5 10 465.6 21.1 -162.1

2018-19 330.1 8.9 514.0 10.4 -184

2019-20 313.2 -5.11 474.0 -7.80 -160.8

INDIA RUSSIA TRADE
1. Enhancing trade and economic cooperation between India and Russia is a key priority for the
political leadership of both the countries as is clear by the revised targets of increasing bilateral
investment to US $ 50 billion and bilateral trade to US $ 30 billion by 2025
2. As per Indian figures, bilateral trade during April 2020-March 2021 amounted USD 8.1 billion.
Indian exports amounted USD 2.6 billion while imports from Russia amounted USD 4.48 Billion.
For the same period, as per Russian Figures, bilateral trade amounted to USD 9.31 billion, with
Indian exports amounting to USD 3.48 billion and imports amounting to USD %.83 billion.
3. A number of institutionalized mechanisms have been set up for the development of economic
cooperation between the two countries. The primary institution at the government level is the
India Russia Intergovernmental Commission for Trade, Economic, Scientific and cultural
Cooperation (IRIGC-TEC). Further pursuant to the decision taken strategic Economic Dialogue
(IRSED) has been established for cooperation in the field of development of economic policy and
to encourage regular interactions and cooperation between the two countries. So far, 23
sessions of the IRIGC and 3 sessions of the IRSED meeting taken place.
4. India is also contemplation and FTA/CECA with the Eurasian Economic Union. The Eurasian
Economic Union is one of the important emerging economic blocks, and India is keen to engage
more closely with Russia and the CIS Countries to further intensify our trade and economic
cooperation with this region.
5. There have been regular bilateral exchanges at the highest levels. In 2021, Prime Minister Modi
addressed the plenary session of the 6th Eastern Economic Forum in Vladivostok through a video
message in presence of President Vladimir Putin. His message was well received by the Russian
side and President Putin made special mention of Prime Minister’s concept of “sangam” as a
development tool for countries in the region. Earlier during 04-06 September 2019, Prime
Minister Visited Vladivostok to participate in the 5th Eastern Economic Forum as Chief Guest.
The 20th Indo-Russian Annual Summit was held during the visit, during which 50 agreement were
signed including 15 documents on Government level and 35 agreements related to economic
and trade matters.
 6. Bilateral Trade figures for last ten years are given below:

(amt in US $ billion)

Year India’s Imports from Russia India’s Exports to Russia

2010 6.39 2.14
2011 6.09 2.79
2012 7.91 3.04
2013 7.01 3.10
2014 6.34 3.17
2015 5.58 2.26
2016 5.23 2.36
2017 6.46 2.90
2018 7.75 3.23
2019 7.24 3.92
2020 5.83 3.48
2021(jan-june) 3.22 2.01

7. Trade in services: Bilateral trade in services has remained stable during the last 5 years with
trade balance in Russia’s favor. While in 2017, trade in services was USD 1095.4 million, it
reduced slightly in 2018 to USD 999 million. The figure states at USD 973.6 million for the year
2020
INVESTMENT
8. Russian investment in India in 2017 has reached 18 billion USD and India’s total investment in
Russia so far is 13 billion USD that was set for 2025 has been already crossed. The cumulative
Indian investments in Russia, (bulk to which is in hydrocarbons sector) was about US $ 8 billion
for the period 2000-2014 while the cumulative Russian investment in India over the same period
were about US $ 4 billion, mainly in automotive (KAMAZ) and telecommunications (AFK Sistema)
sectors. In 2015-2017, there was a renewed emphasis on increasing the bilateral investment,
especially in the hydrocarbon sector.
9. Both the Governments have undertake initiatives to promote bilateral investments, primarily
through facilitating high-level Government to business and Business to Business contacts apart
from the on-going investment process in strategic sectors in both the countries. Investment
cooperation has been envisaged in some priority sectors such as hydrocarbons, power, coal,
nuclear power, fertilizer, IT, mineral and metallurgy, steel, pharmaceuticals, infrastructure
projects amongst others.
 REGIONAL ENGAGEMENT
10. Collaboration between states of India and Regions of Russia in the trade and economic sphere is
an important pillar of overall bilateral relations. There exist many sister-city/state arrangements
between the two countries which include economic cooperation.
BANKING LINKS
11. Development of banking links between India and Russia has witnessed some concrete progress.
Several Russian banks have opened their Representative Offices/Branches in India. These
Include VTB , Sber bank, Vnesheconom bank, Promsvaz bank and Gazprom bank. Similarly, the
Commercial Bank of India like State Bank of India and Canara Bank is providing banking services
in Russia.
12. Indian Exports to Russia (USD Million)
Items 2018 2019
Electrical Machinery and Equipments 319.2 671.9
Pharmaceutical Products 513.9 632.7
Nuclear Reactors, Boilers, Machinery and Mechanical 304 382.8
Appliances; Parts thereof
Organic Chemicals 214.7 282.3
Vehicles and other parts and Accessories There off 155.1 136.6
13. India’s Imports From Russia (USD Million)
Items 2018 2019
Mineral Fuels, Mineral Oils and products of their Distillation; 1855.1 2197.5
Bituminous substances; Mineral Waxes
Nuclear Reactors, Boilers, Machinery and Mechanical 1097.5 842.9
Appliances; parts thereof
Previous Stones ,Metals and Jewellery 1075.6 766.3
Electrical Machinery and Equipment and parts Thereof; 520.5 366.2
Fertilizers 309.9 344.3
14. Trade of Goods and Services In 2020 between India and Russia (USD Billions)
Particulars Goods Services
Imports From Russia 5.83 0.752
Exports To Russia 3.48 0.220