India-Russia Trade Gap

India is aiming to balance its bilateral trade with Russia, which is currently skewed heavily in Russia's favor. During Prime Minister Narendra Modi's recent visit to Russia, both nations set an ambitious trade target of $100 billion by 2030, up from the current $65 billion.

Current Gaps

• Trade Deficit: India has a significant trade deficit with Russia, with Russia's exports to India estimated at $61 billion in 2023-24, while India's exports were only about $4 billion. The trade imbalance is largely due to India's high imports of discounted Russian oil.
• Export Barriers: Non-tariff barriers are impeding the growth of Indian exports to Russia. These barriers affect products such as marine goods, pharmaceuticals, and consumer goods.

Reasons Behind the Trade Imbalance Between India and Russia

• High Energy Imports: India imports a significant amount of crude oil, petroleum products, and coal from Russia. These energy imports make up a major portion of India's total imports from Russia, heavily skewing the trade balance. The surge in oil and fertilizer imports, particularly from early 2022, has been a key driver of this imbalance. Petroleum products alone account for 84% of India’s imports from Russia.
• Limited Indian Exports: While Indian exports to Russia include pharmaceuticals, agricultural products, machinery, and textiles, their volume and value are not sufficient to balance the high imports of energy products. This disparity in trade volumes contributes significantly to the trade imbalance.
• Impact of Western Sanctions: Western sanctions have limited Russia's ability to export certain high-value goods, impacting the trade balance between the two countries.
• Logistical Challenges: Geographical distance and logistical issues contribute to higher trade costs between India and Russia. Poor transport infrastructure, long transit times, and limited direct shipping routes or air links increase the overall cost and complexity of trade, affecting the competitiveness of Indian goods in the Russian market.

Solutions to Rectify the Trade Imbalance Between India and Russia

• Increasing Indian Exports: India must aim to boost exports to Russia across various sectors including agriculture, technology, pharmaceuticals, and services. Additionally, promoting textiles, gems, jewellery, and increasing tourism through targeted marketing and easier visa processes can further enhance trade.
• Advancing Free Trade Agreement (FTA) Negotiations: An FTA could facilitate greater market access and reduce trade barriers, helping to create a more balanced trade relationship.
• Enhancing Use of Local Currencies: The rise in using local currencies for trade has helped reduce dependence on the US dollar and lower transaction costs.
• Improving Transport Infrastructure
  • International North-South Transport Corridor (INSTC): This 7,200-km network of ship, rail, and road routes is designed to enhance trade connectivity between India, Iran, and Russia. It aims to provide a shorter transportation route linking the Indian Ocean to the Caspian Sea and beyond to North Europe.
  • Chabahar Port in Iran: This port offers a strategic route for Indian goods to Central Asia and Afghanistan, bypassing Pakistan. It provides India with access to new markets and a foothold in the region.
  • Eastern Maritime Corridor: This emerging route between Chennai and Vladivostok significantly reduces travel distance and logistics costs compared to the current route via the Suez Canal. The shorter distance improves efficiency and reduces transportation expenses.