India – Russia Trade
- August 20, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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India – Russia Trade
Sub: Eco
Sec: External sector
- US Sensitization of Indian Companies:
- The United States is sensitizing Indian companies about certain items that should not be exported to Russia, including chemicals, defense equipment, and aeronautical parts and components.
- These items can potentially be used in missile systems and may aid Moscow in its war against Ukraine, which could lead to secondary sanctions from the West.
- Rising Exports Amidst Tensions:
- The warning comes at a time when India’s exports of engineering goods and chemicals to Russia are on the rise.
- The US has held consultations with Indian exporters to raise awareness about economic sanctions against Russia and the risks involved in exporting certain items.
- Impact of Ongoing War:
- Russia’s war with Ukraine, which began in February 2022, has caused significant loss of lives, livelihoods, and property, as well as global turmoil.
- In response, the US and its Western allies have been tightening sanctions against Moscow.
- Indian Companies Affected:
- Some Indian companies have already been affected by these actions.
- Si2 Microsystems, a Bengaluru-based company that designs and manufactures electronics equipment, was sanctioned by the US, followed by the EU and Japan, for allegedly aiding Russia militarily.
- Sanctions on Indian Individuals and Entities:
- Recently, two Indian individuals and some entities operating from India were placed on the sanctions list of the US Treasury’s Office of Foreign Assets Control for collaborating with Russia.
- Potential Impact on Exports:
- Washington’s increased scrutiny could act as a dampener on India’s growing exports to Russia, especially in the sectors of engineering goods and chemicals.
- India’s Rising Exports to Russia:
- In the fiscal year 2023-24, India’s exports to Russia increased by 35.41%, reaching $4.26 billion.
- Engineering goods shipments doubled to $1.22 billion, while chemical exports increased to over $500 million in the same period.
Overview of India-Russia trade focusing on imports and exports
Overview of India-Russia Trade:
- Bilateral Trade Volume: India and Russia’s trade relationship has seen significant growth, particularly after the Ukraine war began in February 2022. The bilateral trade volume reached USD 65.7 billion in the financial year 2023-24.
- Trade Imbalance: The trade relationship is marked by a significant imbalance, with India’s imports from Russia far outpacing its exports.
Top 3 Indian Exports to Russia:
- Pharmaceutical Products:
- India exports a substantial amount of pharmaceutical products to Russia, including generic drugs, vaccines, and active pharmaceutical ingredients (APIs).
- Trend: The demand for Indian pharmaceutical products has grown due to Russia’s need to secure reliable sources for essential medicines amid Western sanctions.
- Engineering Goods:
- This category includes machinery, electrical equipment, and parts for vehicles and aircraft. These goods have been a significant part of India’s exports to Russia.
- Trend: The export of engineering goods doubled in 2023-24 to USD 1.22 billion, driven by Russia’s increasing need for these products as it seeks alternatives to Western suppliers.
- Chemicals:
- India exports a variety of chemicals to Russia, including organic and inorganic chemicals, dyes, and pigments.
- Trend: Exports of chemicals to Russia have increased notably, reaching over USD 500 million in 2023-24. This growth is partly due to the sanctions on Russia, which have prompted it to seek new suppliers.
Top 3 Indian Imports from Russia:
- Crude Oil and Petroleum Products:
- Crude oil is by far the largest import from Russia, accounting for 88% of India’s imports from Russia.
- Trend: Imports of crude oil surged by about 8,300% from 2020-21 to 2023-24 due to favorable trade terms and Russia’s need to find new markets. This strategic procurement has led to a significant increase in India’s overall oil import bill.
- Fertilizers:
- Russia is a major supplier of fertilizers to India, including urea, potash, and phosphates.
- Trend: Fertilizer imports have been consistent, given India’s agricultural demands. The trade has grown due to Russia’s efforts to maintain its export levels despite sanctions.
- Coal:
- India imports a considerable amount of thermal coal and coking coal from Russia, used in power generation and steel manufacturing.
- Trend: Coal imports have been stable, with occasional spikes due to fluctuations in global coal prices and India’s energy needs.
Recent Trade Trends:
- Post-Ukraine War Dynamics: The ongoing conflict and Western sanctions have led to a significant shift in India-Russia trade. India has increased its imports from Russia, particularly crude oil, which has driven the trade deficit higher.
- Local Currency Trade: There are discussions around settling trade in local currencies to mitigate the impact of sanctions. However, challenges persist due to the limited international use of the Indian rupee and Russia’s reluctance to accumulate it beyond a certain limit.
- Strategic Partnerships: India and Russia have set a bilateral trade target of USD 100 billion by 2030, indicating a strong intent to deepen economic ties despite the current challenges.