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, Indian Foreign Secretary Harsh Vardhan Shringla said on Wednesday addressing a meeting hosted by the Russian Ministry of Foreign Affairs in Moscow.
Shringla said that the India-Russia trade, which amounted to US$10.11 billion in 2019-2020, is far below its actual potential. “Last year there was a slump, but we are finding ways of reviving it. Both countries have set the bilateral trade target at US$ 30 billion by 2025,” he said.
A move made by the two nations to enhance the trade is the commencement of negotiations in August 2020 for the India-Eurasian Economic Union (EAEU) Free Trade Agreement.
The EAEU includes Armenia, Belarus, Kazakshstan, Kyrgyzstan, and Russia and occupies a geographic space between China and the European Union. It has a market of 175 million people and a GDP of US$5 trillion. Such an FTA would open markets in Central Asia to Indian businesses.
Shringla said, the operationalization of a “Green Corridor” and a bilateral investment protection arrangement are also likely to encourage bilateral trade and investment, respectively, while the use of national currencies in bilateral trade settlements would reduce cost and time as well as reducing risk of delayed payments.
Both the nations India and Russia are members of the BRICS group of nations that have previously agreed to look at non-US dollar settlements in mutual trade. The development of a BRICS digital currency has also been discussed.
Shringla also highlighted that the oil and gas sector has been a flagship sector of commercial cooperation and said the two countries have been looking out for ways to diversify economic exchanges. India is looking at investment in new areas, such as coking coal, timber, and LNG.
“We have already started a shipping line between Vladivostok and Chennai. We are looking at a significant trade route which was never there, a new route between our two countries.”
Pointing upon the significant investments done by Indian companies in Russia, he said India’s investment in the Sakhalin-1 project was one of India’s earliest public sector investments abroad.
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 percent stake in India’s Essar Oil at a cost of US$12.9 billion.
Shringla said that India is 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.
“We are looking at long-term arrangements for the supply of coking coal from Russia for Indian steel plants. An India Energy Centre will be opened in Moscow next month,” the minister said.
Furthermore, he underlined 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. Indian companies are actively exploring investments in Russia in energy, minerals, infrastructure, and healthcare, he said.
Shringal acknowledged that the COVID-19 pandemic revealed several chokepoints and vulnerabilities in global supply chains, he said this has allowed India and Russia to analyze where they can stand together to overcome over-dependence and over-reliance on certain economies.
He said India and Russia have prioritized the International North-South Transport Corridor and the Eastern Maritime (Chennai-Vladivostok) Corridor as alternatives to the limited and expensive traditional routes.