India and Russia: Impact on Trade Ties as Delhi Eyes Eurasian Economic Union FTA

Op/Ed by Chris Devonshire-Ellis 

India and Russia are currently engaged in discussions concerning a free trade agreement (FTA) between India and the Eurasian Economic Union (EAEU), which consists of Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan.

There are good reasons to believe this will happen in 2020 as these markets offer Indian manufacturers and producers access to a combined EAEU market of 173 million people, while acknowledging that Russian businesses are less likely to be as disruptive to the Indian market as say for example the China alternative. Comments I made on this were recently highlighted in Japan’s Nikkei Asian Review last week. 

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India Turns Down RCEP Free Trade. Will it Turn to the Eurasian Economic Union?

Bilateral trade has been increasing in recent years, although it is still way under the latent potential.

Both are members of the BRICS grouping and the Indian Prime Minister, Narendra Modi attended the Far Eastern Economic Forum in Vladivostok last year. I discussed the outcome of that forum in the article India-Russia Business Ties Developing in Energy, Shipping, Agriculture, and Jewelry Fields.

India is in the market for oil and gas supplies and has been buying LNG from Russia’s Yamal facility in the Arctic.

India also sees opportunities for developing specific vessels to transport that gas, with a potential shipyard being in sited in Gujarat, Modi’s political base. The two countries have stressed their need to develop trade, with Prime Minister Modi and Russian President Putin pledging to raise bilateral trade to US$30 billion by 2025.

But what else do the two countries trade? 

Indian exports to Russia 

Indian exports to Russia are on an upward trend, a situation that will further, and sharply, increase should an EAEU FTA materialize. If so, this is good news for Indian producers of generic medicines, tea, canned vegetables, grapes and raisins, rice, coffee and coffee extracts, and related consumables, such as spices, herbs, and essences. 

Russian exports to India 

Exports of beans to feed Indian consumers have grown to US$14.5 million from just US$2 million in the past two years, while sales of sunflower seeds and other oil-producing crops have also increased. Russian radar equipment as well as compasses and other navigational products also became important exports to India, while areas of growth include uncut diamonds, silver, mineral and chemical fertilizers, crude and petrochemicals, machinery, synthetic rubber, polymers, plastic products, and paper and other products.

Related Reading

Russia, India Want to Increase Bilateral Trade to US$30 Billion in Next Five Years

Businesses in either India or Russia looking to take advantage should be discussing business intelligence and market research programs to properly define the size and accessibility of these respective markets – both are huge countries and a program to maximize initial investments – and where – need to be developed. 

This is where our firm can assist – Dezan Shira & Associates maintain offices in Delhi, Mumbai, and Bangalore and can assist with developing business plans for Russian producers looking at the Indian market. We also have representation in Moscow and St. Petersburg and can assist Indian producers to understand and develop a business case for Russia. Enquiries should be sent, in both instances, to Maria Kotova at india@dezshira.com.

While I do not expect an India-EAEU FTA to be signed until later in the year, it is wise to prepare. Such an FTA will provide excellent opportunities for Indian businesses to access the Russian and Eurasian Economic Union markets, and time should be invested to understand where the opportunities lie. 

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