Russia for the first time entered the top three largest trade partners of India

The trade turnover between Russia and India in January-May 2023 amounted to $27.1 billion, follows from the data of the Ministry of Trade and Industry of this country. This record figure allowed Russia for the first time to be in third place among India’s trading partners.

At the same time, an imbalance remains in the trade of the two countries, which entails a number of additional problems: exports of Russian goods to India amounted to $26.5 billion, while imports from India are estimated at only $639 million.

In April-May 2023, Russia was the second supplier of goods to India ($11 billion, an increase of about 200% compared to the same period last year), second only to China in this indicator (almost $15.8 billion). In total, the trade turnover between China and India, which have complex political relations, in the first five months of 2023 amounted to $41.1 billion, which is 9% less than in 2022.

Followed by the US ($30.4 billion, down 12.5% ​​year-on-year), the UAE ($24.2 billion, -11% year-on-year) and Saudi Arabia ($18.3 billion, -9.1% year-on-year) ).

The imbalance in trade worries the authorities of both countries, despite the top-level agreement reached last year on a trade turnover target of $30 billion by 2025 (according to Russian Deputy Prime Minister Denis Manturov, trade turnover exceeded $35 billion in 2022). For example, Faggan Singh Kulaste, Minister of State for Steel of India, said this on the sidelines of the SPIEF on June 16, adding that the parties are working to remove obstacles hindering the supply of Indian goods to Russia.

On May 5, Russian Foreign Minister Sergei Lavrov said that Moscow, as a result of trade settlements with India, had accumulated “billions” of rupees in accounts in Indian banks, which it could not use. “This is problem. We need to use this money. But for now, these rupees have to be converted into another currency. The issue is being discussed,” he said at the time.

The rupiah is a limited convertible currency, it is not traded on the Moscow Exchange, and its exchange in large volumes requires the permission of the Indian regulator.

An important factor in the growth of Russian exports to India is oil, but in addition, Russia has seriously increased the supply of fertilizers and other raw materials to this country, says Sergei Lunev, professor at the MGIMO Department of Oriental Studies. The countries are trying to correct the huge imbalance, as Indians traditionally do not like any negative balance in economic relations with other countries, such as China, he adds.

The problem with weak imports to Russia from India is largely connected, according to the expert, with the development of trade routes: now it is almost impossible to deliver goods by land, since transit through Pakistan and Afghanistan is impossible. The extremely profitable North-South trade route through Iran de facto functions very poorly due to problems with the docking of railways, sea and river transport.

“Russia can invest the accumulated rupees in Indian projects,” Lunev said. Although so far the history of such investments does not speak of success. “Now this process will be much more active, as India becomes a very attractive country for investors,” he says.

The trade turnover between Russia and India in 2021 amounted to about $11 billion. For a qualitative change in the situation, the parties need to establish trade in capital-intensive goods on an ongoing basis, IMEMO researcher Gleb Makarevich. Russian business has not yet adapted to the Indian market, despite the presence of a number of interesting proposals there, and has not yet formulated its own requests, he concludes.