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With the Indian Reserve Bank opening the route for the Rupee to be used in international settlements, increasing amounts of Russia-Indian trade can now be expected to be traded in each each others currencies. Indian imports from Russia have already jumped 272% in the period April-May this year to reach US$5 billion, as Russian companies begin to look at accessing the vast Indian market. On top of these existing trends, Russia and India are negotiating a Free Trade Agreement via the Eurasian Economic Union, an opportunity that would suit both and see trade volumes jump further still.

The Indian Foreign Secretary Harsh Vardhan Shringla has previously said that India and Russia should diversify their trade basket and economic exchanges by going beyond the traditional sectors and cooperating in new areas like railways, transport and logistics, pharmaceuticals, minerals and steel that will add momentum to the bilateral ties.

Russia-India bilateral trade, according to Indian Customs data during the Indian fiscal year April 2021-March 2022 is averaging over US$1 billion a month and grew by 18% in the past 12 months. This comes as the two governments work toward a proposal to settle trade in rupees and rubles and look for ways to balance the trade given that India is a net importer of Russian goods.

The Indian middle class consumer market is about 350 million people from a total population of about 1.3 billion. That compares to the EAEU with a total population of about half that. The operationalization of a Russia-India “Green Corridor” and a Bilateral Investment Protection Arrangement are also likely to encourage bilateral trade and investment.

While the oil and gas sector has been a flagship sector of commercial cooperation, the two countries have been looking out for ways to diversify economic exchanges going beyond the traditional areas. India is looking at investment in new areas such as coking coal, timber, and LNG in addition to agriculture and consumer goods.

To date, Indian oil and gas companies have acquired stakes in five Russian companies/projects at a value of about US$15 billion. Rosneft was the leader of a consortium of investors that, in 2017, acquired a 98 per cent stake in India’s Essar Oil at a cost of US$12.9 billion. India is also privatizing its major oil companies, and some are having discussions with their Russian counterparts to see if some of these stakes can be acquired by Russian investors. India’s Energy Minister has stated that “We are looking at long-term arrangements for the supply of coking coal from Russia for Indian steel plants. An India Energy Centre has been opened in Moscow.”

Underlining the importance of diversifying and expanding India-Russia trade he said, there is interest in taking forward cooperation in railways, transport and logistics, civilian ship building and repair, inland waterways, pharmaceuticals and medical devices, minerals, steel, chemicals, including petrochemicals, ceramics, agro-industry, timber, high technology, and scientific research.

In the general, non-energy consumer area, Russian companies can look at other areas to sell good 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 the important exports to India, while areas of growth include uncut diamonds, silver, mineral and chemical fertilizers, crude and petrochemicals, as well as machinery, synthetic rubber, polymers, plastic products, paper and other products.

Businesses in Russia looking to access India should be discussing business intelligence and market research programmes to properly define the size and accessibility of these respective markets – India is a huge country and a programme to maximize initial investments – and where – need to be developed.

A medium-longer term route to better manage trade, source Indian goods and look for buyers is to establish a Liaison Office in India.  

There is Russian and Indian Government support for increasing bilateral trade with both President Putin and Prime Minister Modi saying that bilateral trade should be increasing by US$2 billion per annum. According to Pew Research, India has a total middle class consumer base of some 84 million with average annual income of roughly US$18,250. These tend to be concentrated in the main cities of New Delhi, Mumbai, Kolkota, Bangalore, Chennai and Hyderabad, although it must be stated that attention to detail needs to be paid in reaching them – the majority of the cities population are not to that income level.

There are also options to sell to Indian consumers online. Nevertheless, with the Asian Development Bank indicating a revised 2022 Indian GDP growing at 7.5%, opportunities in India for Russian exporters looking for new markets should not be overlooked.