INDIA RUSSIA TRADE IMBALANCE

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Context

• Acknowledging that a significant imbalance in trade heavily in favour of Russia needs addressing in the rupee-ruble trade, visiting Russian Deputy Prime Minister said that his country was keen to import manufacturing equipment, including machinery, from India to replace the West.

Details

• Russian deputy PM was in India to co-chair the 24th Russia-India Inter-Governmental Commission (IGC) meeting with External Affairs Minister S. Jaishankar,which is expected to review defence, energy and agriculture cooperation between the two countries.

Background

• The comments need to be seen against the backdrop of Western sanctions on Moscow due to the war in Ukraine and payments emerging as a major issue in India-Russia relations.
• Payments, logistics and certifications are real concerns.
  • There have been efforts towards payments through rupee-ruble trade for which Vostro accounts were created.
  • At least 20 leading Russian banks have opened Special Rupee Vostro Accounts in authorised dealer banks in India to help fast track payments.

Trade and Economic Relations

• Enhancing trade and economic cooperation between India and Russia is a key priority for the political leadership of both the countries.
• India-Russia trade and connectivity lag behind those between China and Russia.

The Numbers

• 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 5.48 billion.

Target

• It is clear by the revised targets of increasing bilateral investment to US $ 50 billion and bilateral trade to US $ 30 billion by 2025.

Mechanisms

• A number of institutionalized mechanisms have been set up for the development of economic cooperation between the two countries.
• India Russia Intergovernmental Commission for Trade, Economic, Scientific & Cultural Cooperation (IRIGC-TEC).
• India-Russia 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.
• India is contemplating an FTA/ CECA with the Eurasian Economic Union. India is keen to engage more closely with Russia and the CIS countries to further intensify our trade and economic cooperation with this region.

Bilateral 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 stands at USD 973.645 million for the year 2020.

Investment

• Russian investment in India in 2017 has reached 18bn USD and India’s total investment in Russia so far is 13 bn USD. The overall investment target of 30 bn USD that was set for 2025 has been already crossed. Investment cooperation has been envisaged in some priority sectors such as hydrocarbons, power, coal, nuclear power, fertilizers, IT, mineral and metallurgy, steel, pharmaceuticals, infrastructure projects amongst others.

Way Forward

• There is a need to increase Indian imports. For example, with China Russia has $200-bn trade but it’s balanced 50:50.
• The bilateral trade effort is to identify new industrial points which will give additional impetus for trade as the balance is currently in favour of Russia.

PRACTICE QUESTION Q) The bilateral trade effort between India and Russia is to identify new industrial points which will give additional impetus for trade as the balance is currently in favour of Russia. Comment. (150 words)

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