India-Russia Economic Relations: an Overview

India and Russia have shared strong and warm bilateral relations over the last many decades. The dissolution of the Soviet Union in 1991 was the primary reason for a slowdown in trade and relations between India and Russia. However, as the Russian economy has stabilised, relations with India too have accelerated, if not in substance, at least in intent. During President Putin’s visit to India in 2000, Russia and India became strategic partners and resolved to deepen relations in all areas of mutual interest. In 2006, India’s Minister of Commerce and Industry, Mr. Kamal Nath and Russia’s Minister of Economic Development and Trade, Mr. German Gref announced a turnover target of US$ 10 billion for India-Russia’s bilateral trade. An MOU between India and Russia signed in March 2006 provides for the setting up of a Joint Study Group (JSG) to assess the feasibility of signing a Comprehensive Economic Cooperation Agreement by India and Russia.

Riding on the back of rising oil prices, Russia’s economy has grown considerably since the 1990s. However, trade figures between Russia and India have not been proportionate to their potential. India’s percentage share in Russia’s total imports has declined from 1.21% in 1997 to 0.83% in 2004.


India’s top five export to Russia (2005-06), in descending order include (i) pharmaceutical products, (ii) coffee, tea, mate and spices, (iii) misc. edible preparations, (iv) tobacco and manufactured tobacco substitutes, (v) preparations of vegetables, fruit, nuts or other parts of plants. Russia’s top five exports to India (2005-06) in descending order include (i) iron and steel, (ii) fertilizers, (iii) natural or cultured pearls, precious/semi-precious stones, (iv) nickel and articles thereof and (v) paper and paperboard, paper pulp or paperboard.


Source:Source: SIA, GOI

Source: Investment Division, DEA, Ministry of Finance, GOI


Given the geographical distance between India and Russia, India cannot hope to take China’s place in terms of volume of bilateral trade, currently pegged at $29.1 billion in 2005, up 37.1 percent year on year. However, India and Russia can boost greater cooperation in diverse fields through joint ventures, collaborations and joint development initiatives. A major area of synergy between India and Russia is in the energy sector. Russia’s importance as a supplier of energy feeds into India’s own rising demand for multiple sources of energy to fuel its growing economy.

• Biotechnology/ biomedicine – joint centre for hydrate studies at the National Institute of Ocean Technology in Chennai a biomedical technology centre in Kerala.
• High-tech cooperation and scientific cooperation – a joint centre for transfer of technologies, advanced computing research in Moscow, biotechnology in Allahabad powder metallurgy in Hyderabad
• Russia’s Kamaz, Lada and Gaz have shown interest in sourcing automotive components from India through JVs and technology tie-ups.
• India can invest in aviation, pharmaceuticals, IT and software, gems and jewellery, oil and gas in Russia. Internet usage in Russia has grown from 4 million in 2000 to about 22 million at the end of 2005. The growth has been slow and there is immense potential in this area for India to invest in Russia – in areas of e-education popularising e-governance in Russia, fixed-line telephone network, computerisation of post offices and schools and so on.
• A demand for an early finalisation and signing of a draft inter-governmental agreement regarding higher off take of Indian tobacco by Russia through the purchase of cigarettes / tobacco or procuring of cigarettes from a joint venture proposed to be set up in Russia by any Indian company which would procure tobacco from India.
• Request to accord protection to "Darjeeling tea" as a geographical indication and to recognise "Assam", "Nilgiri" and "Indian tea logo" as labels/well known original brands and requested facilitating setting up of joint ventures between Indian tea companies and Russian business houses in order to augment the export of quality tea from India.
• Cooperation in diamond trade through direct trade. The Protocol for cooperation in diamonds was signed during the visit of President Putin to India in October 2004. India has asked Russia to expedite the decision agreed by both sides for inclusion of MMTC in the list of regular participants for auction and tenders for selling of rough diamonds by Alrosa (Russian diamond mining company) as also to explore the action taken by the Russian side for setting up a joint venture by Alrosa with MMTC for manufacturing jewellery in India.
India has also requested Russia to expedite the release of payment due to the Indian exporters and de-link this issue from the overall settlement of state credit. The issue of early conclusion of simplified visa procedure agreement to enhance trade and economic cooperation.
• India must look towards trying to help Russia build its oil and gas infrastructure.
• India can offer its highly skilled and mobile population in crucial industries and sectors of Russia’s economy.