India-Russia economic relations are undergoing a transformation with trade and investment being diversified. The priority spheres of cooperation include nuclear energy, traditional and renewable energy, energy efficiency, oil and gas, metallurgy, machine building, aircraft and helicopter building, automobile industry, medical equipment and pharmaceuticals, chemicals and fertilizers, food processing, infrastructure development. Both countries are focused on improving their business environment, creating new opportunities for interaction.
The Russian and Indian leaders set a goal in 2014 to increase bilateral trade to $30 billion, and mutual investments to $15 billion by 2025. To achieve these impressive figures the governments of Russia and India are constantly addressing bottleneck issues of our trade cooperation: trade facilitation agreement, difficult logistics and financial transactions.
Russia is a part of Eurasian Economic Union (EAEU), which also includes Kazakhstan, Belarus, Armenia and Kyrgyzstan. This market with a population of 183 million and 3,2% of world GDP is very attractive for Indian goods and services.
The proposal of signing the free trade agreement (FTA) between India and EAEU should facilitate to reach this untapped potential. During last two years, a joint study group carried out the feasibility study on FTA to pave the way for starting negotiations on FTA this year. The decision on concluding an agreement between the India and EAEU was welcomed by the presidents of Russia, Kazakhstan, Kyrgyzstan and Armenia at a meeting held in St. Petersburg in December 2016.
One of the main constraints of expansion of our cooperation is very complicated logistics. The North South International Transport Corridor (ITC) is likely to become fully functional, raising the for reduced transportation time and costs between the two countries, and providing a much-required boost to bilateral economic ties. Comparing with sea transportation, a container needs 40 days to travel from St. Petersburg to Mumbai, while rail transport can cut this time in half, and in future, to just 14 days.
The Russian Government has started developing financial support mechanisms for exports. Russian Export Center – one-stop-shop for the Russian exporters – plans to set up Russian Trade House in India with the purpose to intensify SME cooperation between our countries. Branches of Sberbank of Russia OJSC and JSC VTB Bank in India provide trade settlements between India and Russia in national currencies. The intergovernmental negotiations on new bilateral investment treaty are in progress.
The Russian Trade Representation in India deals with a great variety of proposals from Russian companies, and the flow of these requests is growing rapidly. Since 2014, the number of requests has doubled. On offer are a variety of energy, metallurgy and transport equipment, production and processing technologies for mineral resources, water treatment, waste management, medical devices, wood processing products, agricultural and food products. Chemical products, including fertilizers, oil and gas equipment are very popular at the Indian market.
The strategic partnership between Russia and India is proved by the intensity of high-level political contacts. The culmination of the last year’s bilateral agenda was the visit of the President of Russia Mr. Vladimir Putin to Goa on 14-17 October 2016 when, besides attending BRICS Summit, he also took part in the 17th India-Russia Annual Summit with Prime Minister of India. A number of important bilateral agreements was concluded and a joint statement released at the end of the summit.
The two leaders witnessed the signing of Memorandums of Understanding (MoUs) on developing smart cities, transport logistics, shipbuilding and railways in Andhra Pradesh, and cooperation in oil and gas among others. The leaders jointly dedicated Unit 2 of the Kudankulam nuclear power project to the Indian nation. The construction works on Units 3 and 4 have already been started.
After the Goa summit, a deal was signed for paving way to the acquisition of a stake in India’s Essar Oil company with an enterprise value of about $13 billion by Russian giant Rosneft and its partners, with an unprecedented level of Russian investments to India. Rosneft also plans to export 100 million tons of crude to India in the next ten years.
The Indian companies also invest in the Russian oil and gas sector. In 2016 a bunch of deals potentially worth over $5 billion, were signed for acquiring a stake in Russian most promising oilfields. The consortium of companies (Indian Oil, Oil India and BPCL) agreed to buy a stake in Tas-Yuryakh oilfield in east Siberia for $1.1 billion. The abovementioned consortium jointly with ONGC Videsh Limited also signed the agreements for taking a stakes in Vankor field, also in east Siberia, for about $4,2 billion.
This year started with promising developments in bilateral interaction. Led by Vice-Premier Dmitry Rogozin Russian delegation composed of the prominent business delegates and representatives from Russian regions took part at the Vibrant Gujarat Global Summit. In the context of Smart Cities Mission, Mr. Rogozin demonstrated the so-called Safe City security system to the Indian Prime Minister Narendra Modi. Russia had a national stall at the Global Trade Show and a Russia-India business seminar took place with great interest from the Indian companies.