Economic Relations between India and Russia


India and Russia share close strategic, economic and cultural ties for several decades. While Russia is a reliable partner of India, development of India-Russia relations is a key pillar of India’s foreign policy. In 1960, India established strategic partnership with Russia – the first country. In October 2000, the two countries signed the “Declaration on the India-Russia Strategic Partnership” and elevated their relationship to a “special and privileged strategic partnership” in 2010. Both countries are celebrating 70th anniversary of the establishment of diplomatic bilateral relations throughout 2017.

India and Russia have enhanced cooperation in almost all areas including political, security, trade, defence, science and technology and culture. A large number of institutionalised mechanisms at governmental and non-governmental levels contribute to the development of economic cooperation between the two countries. Annual Summit meeting between the Prime Minister of India and the President of the Russian Federation is the highest institutionalised dialogue mechanism since 2000. Russia is the only country with which India has annual summits. So far, eighteen annual summits have taken place alternatively in India and Russia. The 18th annual summit was held recently on June 1-2, 2017 at St Petersburg, Russia between Prime Minister Narender Modi and President Valdimir Putin. This was first time in the history of India and Russia relations, that the bilateral summit was held outside Moscow. During this summit, the two countries signed five agreements. These include ‘General Framework Agreement and Credit Protocol’ for building of two units (5 and 6) of Kudankulam Nuclear Power Plant; an agreement on Intellectual Property; a bilateral cultural exchange programme (2017-19); an agreement on a feasibility study for a high-speed railway link between Nagpur and Secunderabad; and MoU on cooperation on precious stones and jewellery. During the annual summit, the two countries also adopted a St Petersburg Declaration for political and economic development with an action plan for a bright future.

There is regular high-level interaction between the two countries. Two Inter- Governmental Commissions – one on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC-TEC), co-chaired by the External Affairs Minister (EAM) and the Russian Deputy Prime Minister (DPM), and another on Military Technical Cooperation (IRIGC- MTC) co-chaired by Russian and Indian Defence Ministers, meet annually.

Bilateral trade between India and Russia is a key priority for both countries. In the past few years, total trade between the two countries have increased significantly as depicted in Table 1 below. In 2006, bilateral trade (merchandise and services) valued at $3.79 billion and in 2016, it increased to $8.50 billion (see Table 1). Between 2006 and 2016, bilateral merchandise trade grew at a compound annual growth rate (CAGR) of 6.9 per cent whereas trade in services grew at the rate of 13.3 per cent. Table 1 also shows that India has a negative trade balance with Russia in trade in goods and in services as well.

Table 1: Trend of Trade in Goods and Services between India and Russia

 (Value in $Billon)

Year Merchandise Trade Services Trade
Exports Imports Total Trade Trade Balance Exports Imports Total Trade Trade Balance
2006 0.90 2.41 3.31 -1.51 0.13 0.34 0.48 -0.21
2007 0.94 2.48 3.42 -1.54 0.22 0.43 0.65 -0.21
2008 1.10 4.33 5.42 -3.23 0.50 0.68 1.18 -0.18
2009 0.98 3.57 4.55 -2.59 0.21 0.46 0.67 -0.25
2010 1.69 3.60 5.29 -1.91 0.22 0.45 0.68 -0.23
2011 1.78 4.62 6.40 -2.85 0.25 0.51 0.76 -0.25
2012 2.29 4.07 6.36 -1.78 0.34 0.87 1.20 -0.53
2013 2.12 3.89 6.02 -1.77 0.49 0.93 1.42 -0.45
2014 2.10 4.25 6.35 -2.15 0.44 0.64 1.08 -0.21
2015 1.59 4.58 6.17 -3.00 0.25 0.74 1.00 -0.49
2016 1.94 5.55 7.49 -3.62 0.30 0.71 1.01 -0.41

Source: Compiled by author from Export Data Bank, Department of Commerce, Ministry of Commerce and Industry, Government of India, available at; and ‘External Trade in Services of the Russian Federation by Main Partner Countries from 2006-2016’, Central Bank of Russia, available at

Note: Data for Trade in Goods are given for the financial year (April to March) and for Services, it is for calendar year (Jan to Dec).

Indian merchandise exports to Russia are traditionally consists of pharmaceutical products, agricultural products, edible preparations, etc. However, in the last few years, exports of some non-traditional items like nuclear reactors, boilers; and aircraft, spacecraft, etc. have also increased significantly. Between 2006 and 2016, Indian exports of nuclear reactors and boilers have increased more than five times. Indian tea, coffee, tobacco, spices are in high demand in the Russian market. Indian merchandise imports from Russia are largely comprised of gems and jewellery and precious stones, iron and steel; fertilisers and nuclear machinery. In 2016, gems and jewellery accounted for largest share of around 45.4 per cent in India’s imports from Russia.

India’s exports of services to Russia are mostly comprised of tourism and construction services. India’s imports of services from Russia primarily include business, professional, technical and transportation services. Other services such as communication, insurance, financial and informational services account for a very small part of the trade and economic activities between the two countries.

Investment cooperation is important for the furtherance of bilateral economic relations. India and Russia have undertaken various initiatives to promote bilateral investments, primarily through facilitating high-level Government to Business and Business to Business contacts apart from the on-going investment process in strategic sectors. The two countries have signed many agreements. These include Bilateral Investment Promotion and Protection Investments (BIPA) Agreement which was signed on December 23, 1994, and became effective on August 14, 1996. The main objective of BIPA is to promote and protect the interests of investors and create conditions favourable for fostering greater investment by investors of one country in the territory of the other country. Double Avoidance Taxation Agreement (DTAA), which covers taxes on income imposed on behalf of each Contracting State, was signed between the two countries on March 25, 1997, and became effective from April 11, 1998. To promote culture, both countries signed cultural agreement on January 28, 1993. To promote smoother and greater movement of businessmen, the two countries signed a protocol to simplify visa procedures for businessmen on December 24, 2015.

‘Make in India’ initiative taken by the Indian government in 2014 has encouraged more Russian investments in India. According to Department of Industrial Policy and Promotion (DIPP) Ministry of Commerce and Industry, Government of India, between April 2000 and March 2017, cumulative equity foreign direct investment (FDI) inflows from Russia were valued at $1.19 billion, which accounted for about 0.36 per cent of Indian cumulative FDI inflows during this period.

Today, there are many Russian companies have presence in India. These companies invested in sectors such as telecommunications, banking and infrastructure in India. A telecom company, AFK Sistema, has 73 per cent stake in the Indian telecom company, Shyam Telelink. Several Russian banks such as VTB, Sberbank Vnesheconombank, Promsvazbank and Gazprombank, have representative offices/branches in India. Many Russian infrastructure companies such as Transstroi and Tsentrdorstroi (road construction), Elektrostal and Tyazhpromeksport (metallurgical industry) and Stroitransgaz (gas pipeline) have also presence in India. Now, many Russian companies such as Silovyie Mashiny, Tekhnopromeksport are also providing equipment and technical assistance for the construction of the thermal power plants in India.

On the other side, Indian investments in Russia have also increased overtime. According to RBI Database on Indian Overseas Investments, in 2012, Indian investments in Russia were valued at $19.2 million and in 2016, investments increased to $25.3 million. It is surprising to note that in three months of 2017 (from January to March), Indian investments reached to $131 million. Today, a large number of Indian companies have presence in Russia in various sectors. These include oil and gas, manufacturing, wholesale and retail, pharmaceuticals and banking. An Indian public sector oil company, Oil and Gas Corporation (ONGC) Videsh Limited (OVL) has an equity stake of 20 per cent in the Sakhalin-1 project of $2.2 billion and has 15 per cent stake in Rosnett Vankorneft Oil Field, the second largest oil field in Russia. Many Indian banks such as Commercial Bank of India, a JV of SBI and Canara Bank and ICICI Bank Eurasia LLC (wholly-owned subsidiary of ICICI Bank) have representative offices/branches in Russia. Many Indian pharmaceutical companies such as Glenmark Pharmaceuticals Ltd., Unique Pharmaceuticals Laboratory (P) Ltd., Meril Life Sciences Private Limited and Torrent Pharmaceuticals Ltd., have wholly-owned subsidiaries in Russia.

In order to deepen the economic relations, India and Russia decided to sign a comprehensive free trade agreement (FTA). In 2006, both countries signed a Memorandum of Understanding (MoU) to set up a Joint Study Group (JSG) to assess the feasibility of signing a Comprehensive Economic Co-operation Agreement (CECA). In July 2007, the JSG submitted its report, and recommended that there are significant complementarities between the two countries and, therefore, India and Russia could go for CECA. Non-membership of Russia in the World Trade Organization (WTO) posed a major obstacle for the two countries to sign CECA to expand their trade and economic ties.

Russia’s membership in the WTO in 2012; and formation of the Eurasia Economic Union (EAEU) in January 2015, again created hope for India and Russia to strengthen their bilateral relations through FTA. EAEU is a union of five countries such as Armenia, Belarus, Kazakhstan and Kyrgyzstan and Russia. Today, the EAEU is one of the youngest and most promising economic alliances in the world. The union has achieved considerable success in a relatively short time. The EAEU mainly focuses on consolidating the economic cooperation of Eastern countries, the influence of this region is beginning to spread beyond the region. At present, EAEU region has only one FTA – with Vietnam, but negotiations are underway with countries such as Singapore, Iran, Thailand, etc.

The Russia-led EAEU is an important block for India. To step forward, in 2014, India and the EAEU countries agreed to formalise FTA between India and EAEU. In 2015, an agreement was signed for establishing a Joint Feasibility Study Group on India-EAEU FTA. In December 2016, the JSG submitted the feasibility report; and accepted by all countries. The JSG report recommended that the FTA is feasible and mutually beneficial; and there is a potential growth of bilateral trade between India and EAEU up to $37-62 billion by 2025 from $7 billion in 2016-17. The study also predicted that FTA between India and EEAU member countries would help increase India’s exports to EEAU by $14-24 billion by 2025 from $1.9 billion in 2016-17. In other way, the FTA is expected to increase bilateral trade between India and Russia to $30 billion by 2025 from $6.43 billion in 2016-17. The negotiations on the proposed FTA are expected to begin by the end of this year. This would be comprehensive FTA between India and EAEU countries, which will include trade in goods, services and investment. India’s FTA with EAEU region would not only boost economic engagements and bilateral trade and investments between India and other EAEU countries (Armenia, Belarus, Kazakhstan and Kyrgyzstan) but also Russia.