The Russian offer to India for resumption of the bilateral barter trade could not come at a more appropriate time than now when India’s exports are dipping continuously since the end of last year and Russia is faced with substantial western trade and financial blockade after the US jumped into the Ukraine issue raising it to a crisis level. In the 1970s, both India and the then Soviet Union had benefited significantly from such a barter trade and currency swap arrangement in their
bilateral commerce which was subsequently given up on a mutual consent.
Recently, Russia invited BRICS nations to have bilateral trade and remittance settlements in their national currencies with Russia to benefit each other. China has already accepted the Russian offer. Russia is believed to be keen that New Delhi too restarts Rupee trade with Moscow to push the bilateral trade from the current level of only $10 billion to an equivalent of over $30 billion in next six to seven years. The trade target may appear to be modest and highly achievable if India continues to maintain its current growth rate. It is now for Prime Minister Narendra Modi to respond the latest Russian offer when he visits Moscow next month for a summit meeting with President Vladimir Putin.
Last year, India benefited substantially from a partial currency swap arrangement with Iran, the country’s major oil import source, as Iran faced a US-led hard currency hydrocarbon trade blockade. The Indo-Iran trade deal benefited both the countries. India and China continued to import oil from Iran despite the embargo. Some of the Russian import agencies are believed to have recently surveyed possible items of import from India and had exchanged notes with Indian producer-exporters. The dairy sector is believed to be one of them. India’s dairy products export is down following a recessionary trend in the global market after the oil price fall. The possibility of a much higher export to Russia, a major consumer of butter, cheese and other dairy products, is being viewed as good news by popular Indian dairy brands, led by Amul. Other Indian manufacturers-exporters are also looking forward to a possible better opportunity to boost barter trade with Russia under the proposed currency swap arrangement. The Central Banks of Russia and India have set up a joint working group to work out modalities for import settlements in the national currencies. Russia, on its part, is also keen on increasing investment in India.
The resumption of bilateral Rupee trade, if achieved, will be the biggest positive outcome of the forthcoming summit meeting between the Russian president and the Indian prime minister. The two countries are also working on fresh agreements on defence production, nuclear cooperation, oil and gas exploration and exploitation, technology tie-ups, trade and investment, apart from educational and cultural exchange programmes. India’s defence and commerce ministers already had wide ranging talks with their Russian counterparts and both are hopeful of strengthening the economic partnership between the two old allies.
Incidentally, both Modi and Putin held a separate meeting on the sidelines of the BRICKS and SCO summits in Ufa, last July, and deliberated on several important pending as well as new issues involving the two countries. The two leaders were believed to have agreed to take the bilateral cooperation to a new level, widening the trade, economic and investment tie-ups through early completion of a feasibility report of joint working group (JWG) and signing of a Free Trade Agreement (FTA) between India and the Customs Union of Russia, Belarus and Kazakhstan, enhancing the bilateral trade turnover by speeding up the International North-South Transport Corridor (INSTC) project.
Both India and Russia want to maintain the momentum of cooperation in the priority sectors of civil nuclear energy, hydrocarbons, fertilizers, civil aviation, and rough diamonds. These topics are among the ones to stay high on the agenda of the Indo-Russian strategic dialogue. Diplomatically as well as ministry-to-ministry levels, the two countries are engaged to encourage Russian companies to connect with India and Indian businesses under the ‘Make-in-India’ programme more aggressively.
India and Russia are said to be working on a number of joint projects in India, especially in sectors such as engineering, aviation, infrastructure, renewable energy, oil and gas, defence manufacturing, research and development. So far, India has invested a total of $8 billion in Russia, mainly in energy, while Russia has brought in $4 billion into India. The resumption of a barter trade will further boost the investment and rejuvenate India’s export sector. India must make up its mind fast.
Russia has been encouraging Indian companies to jointly extract oil and gas from Arctic Shelf deposits. Public sector ONGC Videsh is working closely with Russian oil companies in this regard. India is expected to push for greater market access for Indian goods and services to the Customs Union member-countries. Defence production and energy cooperation are expected to be high in the agenda of the Modi-Putin summit.
- Russia’s top 10 imports make up $173 billion of a total import bill of $282 billion, thus comprising 62 per cent of its total imports. However, India’s share in these top 10 Russian imports is a meagre 0.61 per cent
- Recent sanctions by the European Union have opened opportunities for Indian products. While market access may be provided due to the place vacated by EU countries, India must take advantage of the present situation
- India’s investment in Russia is estimated to be about $6.5 billion. India is taking huge initiatives in some of the fields where Russian cooperation would be most needed, including Defence, Space technology, Nuclear energy and Smart cities