Millennium Post

Boosting defence partnership

Indo-Russia share great scope for higher trade, technology engagement.

Boosting defence partnership
Union Finance and Defence Minister Arun Jaitley's open invitation to Russian firms, last week, to set up joint ventures with Indian companies to manufacture advanced military platforms through technology transfers couldn't have come at a more appropriate time as India gears up to overhaul its decades-old slow-moving defence production programme. India is the world's largest defence and security gears importer. The gross annual armament and parts import bill, covering all the three services, para-military forces and other connected agencies, is close to US $10 billion. The BJP-led government's path-breaking initiatives for defence production in India have been received enthusiastically by the country's leading private industrial groups such as the Tatas, Reliance, Mahindra & Mahindra and Larsen & Toubro. Defence manufacturers from both sides of the North Atlantic have responded positively to the government's 'Make in India' initiative.

Russia has been India's oldest and most reliable defence, space research and nuclear cooperation partner. However, it had fallen behind in trade and investment in the face of more aggressive competition from countries like China, USA, France, Germany, UK, Canada, Israel, Italy, and Spain, especially since it started the economic reform programme in 1991. Russia has been one of India's key major suppliers of arms and ammunition. However, India's armed forces had a long-standing complaint that supply of critical spares and equipment from Russia often took too long to keep military systems using Russian hardware in top condition.

Last week, it was interesting to note that Jaitley, whose visit to Russia came within days of the summit meeting there between Prime Minister Narendra Modi and President Vladimir Putin, made a fervent appeal to Russian defence majors at the plenary session of 'Technoprom 2017' to take advantage of India's policy changes towards defence production. A strong Indo-Russian joint initiative in hi-tech defence production will benefit both the countries. During Prime Minister Modi's visit of Russia, earlier this month, the two countries signed a historic Rs.50,000 crore nuclear power generation deal under a Russian debt-equity participation programme at Kundamkulan. The Russian government will lend India US $4.2 billion to help cover the construction.

The project will take seven years to start generating electricity. The first unit will be commissioned in 66 months and the second one six months thereafter. Atomstroyexport, a unit of Russian state nuclear corporation Rosatom, will build the reactors.

If Rosatom can take such a smart decision to participate in equity with Nuclear Power Corporation of India to produce atomic power, there is no reason to believe why some of Russia's top defence manufacturers will not collaborate with Indian companies in building advanced military platforms. Jaitley invited Russian companies "to come forward with proposals for technology transfer to Indian companies and facilitate manufacturing of more advanced components/parts and sub-systems. This can start with platforms of Russian origin where the requirement is in large numbers and is recurring in nature." He said Russian companies can be "natural partners" of the Indian companies as most of India's defence equipments and inventory are of Russian origin. A more predictive and smart Indo-Russian defence manufacturing will help both the countries play an active role in the global armament supply chain.

While a substantially active defence and nuclear cooperation will benefit both India and Russia in terms of economic growth and employment, the two countries must also actively collaborate in pushing up production of consumer goods and services. Unfortunately, Indo-Russian trade and commerce have dipped substantially since their heydays in the 1970s and 1980s under a bilateral Rupee-Rouble exchange programme. Until 1990-91, India and the Soviet Union — enjoyed robust trade ties. The USSR was India's top goods exports destination with shipments to the tune of $2.9 billion in 1990. On the other hand, the Soviet Union figured as India's seventh largest sources of imports in value terms at US$992 million.

Unfortunately, Russia now no longer features anywhere near the list of India's top 20 global trade partners. For example, in 2015, India exported goods worth $1.6 billion to Russia, but had shipped more to 37 other countries. That year, India's goods export to the US alone was $40.3 billion — the country's single largest export destination. At the same time, India's imports from Russia were valued at only $4.5 billion as against $61.6 billion from China — the country's largest source of imports, now. India had imported more goods from 23 other nations than it did from Russia in 2015.

Today, Russia comprises just around one per cent of India's total trade and India accounts for a minuscule 1.2 per cent of Russia's overall trade. Experts say that there exists a tremendous opportunity for both the sides to improve trade and investment for mutual benefit. They say that the opportunities exist for the Indo-Russian bilateral trade to touch a $30-billion mark by 2025 and the bilateral investment can easily go up to $15 billion. Lately, India made substantial investment in Russia, including in equity, especially in the petroleum sector. The country is eagerly waiting for an opportunity for the direct gas line project to link Russia with India.

Jaitley's bid to induce Russian defence manufactures to collaborate with Indian entrepreneurs can soon take the bi-lateral economic and strategic cooperation arrangement between the two countries to the next level. The ball is principally in Moscow's court. After the latest Modi-Putin dialogue and Jaitley's repeated parlays with Russia as India's finance and defence minister during this year, it is expected that both the countries will take the opportunity to push fresh joint economic collaboration programmes with focus on playing a more active role in the global trade. The most important part of this latest wholesome economic dialogue is that the two countries have been trusted friends for years. (IPA Service)

(Nantoo Banerjee is writing from Moscow. Views expressed are strictly personal.)
Nantoo Banerjee

Nantoo Banerjee

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