The two countries, India and Russia, are planning to open doors for the Free Trade Agreement, said the Russian trade minister. Now this development can strengthen the bilateral relationship even further that has developed since the time of conflict happened in Ukraine.
The FTA dialogue will scale the economic relations between Russia and India regardless of regular demands from the West for India to remove Russia from being its main weapon supplier country ever since the latter invaded Ukraine. In the last fiscal year, India imported oil of approximately $46.33 billion from Russia.
Recently, Russia’s Deputy Prime Minister Denis Manturov said at an event in New Delhi that Russia devotes special consideration to matters related to the mutual availability of manufacturing to the marketplaces of their states. He also said that Russia is looking forward to moving ahead with the free trade agreement with India with the EEC (Eurasian Economic Commission).
From India’s side, Foreign Minister S. Jaishankar conveyed how the COVID-19 pandemic had put a halt to discussions on FTA between Russia and India. However, now is when there can be actual growth in the trade relationship between the two countries. Considering this fact, they are now also looking out for progressive negotiations on a new bilateral investment treaty.
While New Delhi and Moscow have managed to withstand the West’s pressures and made bilateral trade the biggest benefactor for the two countries, there is a high surge concerning imports from sanctions-hit Russia that have led to trade being just one-sided.
The meeting between Jaishankar and Manturov can be a promising one for the future as both conveyed how they have decided to work on an agreement that can safeguard investments. Jaishankar highlighted the critical need to fix the trade imbalance caused by the recent growth in two-way trade to $45 billion.
Ever since last year, trade between Russia and India has grown exponentially. This was driven largely by India buying huge amounts of discounted Russian crude oil when Russia was hit with sanctions from other countries. In the present scenario, India has already established Russia as one of its main energy suppliers, which has not openly attacked Russia’s aggressiveness and has urged for an end to hostilities and the promotion of dialogues. The world heard Indian prime minister Narendra Modi’s statement “This is not the era of war” during his bilateral meeting with Russian President Vladimir Putin.
Jaishankar and Manturov further said that Trade preferences and a system that fully ensures investment protection will be of interest among Indian and Russian business people.
One of the Indian officials who wanted to be anonymous said that discussions between India and EEU on FTA did begin in 2017 however due to unforeseen circumstances like the COVID-19 pandemic, it got delayed. Currently, both countries are trying to expedite the process in this regard.
Indian External Minister Jaishankar emphasised that India and Russia are already ahead of their set bilateral trade goal of $30 billion before the target year 2025. But due to high increase in two-way trade between April and February 2023 to $45 billion has resulted in concern about trade imbalance which is justified.
What can be done?
Here now, two parties should get on their toes and resolve this imbalance by addressing obstacles including issues in payments, access to the market, transportation and non-tariff impediments.
The two countries should also look into how they can diversify theirs by widening their product range. This could be done by looking into areas of pharmaceutical products, electronic equipment, automobile spare parts, solar photovoltaic modules, agriculture-related goods, clothing, groceries, and so on.
Both the ministers mentioned the issues that occurred due to sanctions imposed by the West on Russia, majorly in trade settlement. While India and Russia have given their acceptance to rupee-ruble trade, there are some latest reports that there could be some problems in processing payments to Russia.
External minister Jaishankar said that Indian businesses could face some potential risks and an insufficient concern of recognition on the Russian front. In this regard, for the future, both bilateral cooperations should get into each other’s shoes and see from their point of view and come up with a solution accordingly that is best suited for both. He also mentioned transportation, payments, and license/certifications as the main areas of focus.
Both governments will debate the payment problems that include network development under the programme for international trade adjustment in Indian currency. For this, special rupee vostro accounts must be resolved by the systems of both nations.
The Russian side said that facilitating amicable agreements between both parties will encourage commerce even more. According to Mannturov, Russia will propose the possibility of the use of its nation’s currency as well as the currencies of other friendly nations. This will reduce the expense and currency issues at a major level.
Russia considers India as its trusted strategic partner for technologies and components as well as Indian businesses that can fulfil the required demand in Russia for constructing roads, chemicals, medical devices and drugs. Manturov said that this will create ample opportunities for Indian organisations to increase their supply scale to Russia.
Whereas, Indian businesses can benefit from Russia by being a part of its cluster investment platform that helps in gaining preferred lending, income tax favours, and insurance premiums for producing priority goods.
The statement coincided with India’s Free Trade Agreement negotiations with the United Kingdom, Gulf Cooperation Council, and the European Union.
India – Russia have come a long way
India and Russia’s friendship has been time-tested and on standing. Their growing relationship ever since the signing of “The Declaration on the India-Russia Strategic Partnership” in 2000 has only enhanced the level of cooperation between the two nations. Both have maintained cooperation in multiple areas like trade, economics, defence, technology, security, cultural ties, and so on.
From then to now, both nations have not stopped at all. They have intensified their economic and trade relations considering it as the top priority. India and Russia also revised their targets making it $ 50 billion in bilateral investment and $30 billion in bilateral trade by the year 2025. Russia made significant bilateral investments in India in industries like oil, gas, petrol, diesel, banking sector, steel and railways. While on the other hand, India made investments in Russia in areas like the diamond sector, oil and gas, and medical equipment and drugs.
Recently, India and Russia also celebrated their 75th anniversary of diplomatic ties. This shows how they continue and will keep sharing strategic partnerships and friendships in all areas possible. Not just this, the two nations are also part of multiple multilateral organizations and blocs like BRICS, SCO, G20, RIC, and East Asia Summit where space for mutual importance exists.
