India and Russia in Discussions for Free Trade Deal to Boost Economic Ties
India and Russia have been in talks regarding a free trade agreement (FTA), according to a recent statement from the Russian trade minister. This development could enhance bilateral commercial relations, which have grown since the start of the war in Ukraine. The announcement of FTA negotiations represents a significant step forward in economic ties between the two countries, despite calls from the Western countries for India to gradually distance itself from Russia, its primary weapons supplier, due to the country’s invasion of Ukraine in February 2022.
Over the past fiscal year, India’s imports from Russia have surged more than four times, reaching $46.33 billion, mainly through oil. Denis Manturov, the Russian deputy prime minister and trade minister, spoke about the importance of mutual access to production markets between the two countries, saying, “Together with the Eurasian Economic Commission, we are looking forward to intensifying negotiations on a free trade agreement with India.”
FTA talks could help the two countries further strengthen economic ties. Indian Foreign Minister S. Jaishankar has stated that the COVID-19 pandemic disrupted discussions on an FTA between India and the Russian-led Eurasian Economic Union. However, he expressed hope that “our colleagues will pick up on this… because we do believe it will make a real difference to our trade relationship.”
Opportunities for Indian Companies to Increase Supplies to Russia
Manturov has mentioned that Russia is in high demand for road construction material and equipment, chemicals, and pharmaceutical products. These industries could potentially create opportunities for Indian companies to increase their supplies to Russia. This development comes at a time when New Delhi is also engaged in FTA discussions with the European Union, Britain, and the Gulf Cooperation Council.
Widening the Use of National Currencies and Friendly Currencies
Manturov stated that Russia would consider expanding the use of “national currencies and currencies of friendly countries.” India has been keen on increasing the use of its rupee currency for trade with Russia. The move could help both countries evade the impact of Western sanctions by boosting commerce with Asian giants, including China.
Russia’s efforts to improve trade with India are part of its broader strategy to enhance trade with Asian economies, including China, in response to Western sanctions. Moscow is also seeking to increase cooperation with other South Asian nations, such as Pakistan and Bangladesh. Recently, Russia agreed to settle payments in yuan for constructing a nuclear power plant in Bangladesh and discussed discounted oil exports to Pakistan.
Indian businesses could benefit significantly from Russian technology, and the two countries are working to iron out payment, certification, and logistics issues. FTA talks between India and Russia could pave the way for increased commercial cooperation between the two nations. Although the Western countries have been urging India to distance itself from Russia, India has not explicitly criticised the Russian invasion and has called for a peaceful resolution of the conflict through dialogue. The rise in bilateral trade between India and Russia has been impressive during the war, and the FTA negotiations could further enhance economic relations between the two countries.