The report, presented at a conference organized by the Valdai Discussion Club in collaboration with the Vivekananda Foundation, recommended “a shift from a transactional approach to a long-term approach” for the sustainable growth of Russia-India trade relations.
The report outlines a set of measures to address the trade imbalance and achieve the goal of $100 billion in trade volume by 2030.
Marking the beginning of a new era in Russian-Indian trade relations, the report was submitted for review to the Vedomosti newspaper.
Significant progress has been made in recent years to strengthen bilateral trade. Payment mechanisms in national currencies have been bolstered, logistical and insurance frameworks expanded, and trade flows safeguarded against external interference.
However, of the $66 billion trade volume, $60.9 billion represents Russian exports to India, while India’s exports to Russia remain limited to $5 billion. This disparity underscores the need for corrective measures.
To correct the existing imbalance and reach the target of $100 billion in trade volume by 2030, set during Indian Prime Minister Narendra Modi’s visit to Moscow in July 2024, the Valdai report proposed several measures.
First, it proposed to “launch full-scale negotiations on a free trade agreement (FTA) between the Eurasian Economic Union (EAEU) and India as soon as possible.”
Russian Deputy Prime Minister Alexei Overchuk mentioned consultations in October, while the Ministry of Economic Development stated in January that negotiations could take place in 2025.
The author of the report, Lidiya Kulik, Head of the Department of Indian Studies at the Skolkovo School of Management, told Vedomosti that the process would be lengthy. “It is not possible for Russia to conclude an FTA with India alone without the EAEU. This requires an assessment of product positions and tariff policies with all participants,” Kulik said.
Another important proposal is to sign a new agreement on mutual investment protection or a similar document as soon as possible. The 1994 agreement expired in 2017. The Hindustan Times reported that a new agreement was being discussed for September 2024.
According to Kulik, India has previously terminated such agreements with dozens of countries to re-sign them “modularly” on a single template. The main challenge is the need for special conditions for investments between Moscow and Delhi.
In the absence of agreements, strengthening ties between the countries’ regions and utilizing the potential of special economic zones could optimize the working conditions of companies.
Kulik noted that India has extensive experience working with 280 economic zones, and it is important to establish connections between these zones and the regions of the Russian Far East.
The document also proposed “further development” of the trade and investment cooperation program in the Far East and the Arctic by 2029, including roadmaps for concrete projects.
Additionally, the report emphasized the importance of diversifying business contacts based on small and medium-sized enterprises. Currently, large state-owned companies dominate the trade relationship.
Gleb Makarevich of the Centre for the Indo-Pacific Region at the Institute of World Economy and International Relations of the Russian Academy of Sciences (IMEMO) noted that “everything can work when there is a foundation in the form of established contacts and market knowledge.”
Addressing sanctions, the report recommended accelerating the development of financial infrastructure and resolving issues with individual payment mechanisms.
This is “one of the basic conditions for economic relations under sanctions,” Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam Finance Group, told Vedomosti.
According to Kulik, the problem for legal entities has largely been resolved—there are no pending rupees, two Russian banks are operational, and “the third is in line.” She added, “The problem is the cost of payments and bank commissions. Trade imbalance makes them more expensive, and banks need competition.”
The Valdai report highlighted logistics as a critical area for the development of bilateral trade and encouraged Indian investors to invest in the North-South International Transport Corridor, the Chennai-Vladivostok Eastern Sea Corridor (India announced the opening of the line in November 2024), and the Northern Sea Route.
Kulik noted that the Eastern Corridor is limited by the capacity of the Eastern line in Siberia, the North-South Corridor is still “not working properly” due to its multimodality and lack of infrastructure, and the idea of subsidizing transport through a single operator has been rejected by anti-monopoly agencies.
According to Makarevich, there are two views on the development of corridors: they will become functional “when there is something to transport” or when they are fully technologically ready.
The report cited the “inadequate” situation in mutual product certification as one of the urgent problems requiring solutions at the ministerial level.
According to Kulik, unlike tax authorities and customs, direct contact has not yet been established in this area, and certification for some products takes “years,” hindering trade development.
Proposed measures to strengthen trade include creating favorable conditions for the diasporas of both countries and improving labor migration mechanisms.
Kulik noted that India has significant experience in labor export, but due to its aging population, there are less than 30 years left to utilize this advantage.
Although India has a population of 1.4 billion and Russia 146 million, cultural and habitual differences are unlikely to lead to the settlement of large numbers of Indian workers, Makarevich added. “Instead of low-skilled labor migration, the focus should be on educational migration and the creation of contact networks.”