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  • by Smriti Mathur
  • Nov 12, 2022
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India Is Now A Strong Trade Partner Of Russia, Expected To Remain So In 2023: S&P Global Market Intelligence


Key Statistics & Overview On The Indian-Russian Trade So Far

  • Russia will sell $5.93 billion to India in 2020. Russia's primary exports to India include coal briquettes ($923 million), diamonds ($684 million), and other sea vessels ($346 million). Russia's exports to India have climbed at an average pace of 8.69% during the previous 25 years, from $738M in 1995 to $5.93B in 2020.
  • In 2018, Russia exported $439 million in services to India, with Other business services ($233 million), travel ($144 million), and transportation ($32.2 million) accounting for the majority of the amount.
  • In 2020, India will export $2.87 billion to Russia. Packaged Medicaments ($444M), Broadcasting Equipment ($235M), and Tea ($88.3M) were the top three items India sent to Russia. India's exports to Russia have climbed at an average pace of 4.14% during the previous 25 years, from $1.04 billion in 1995 to $2.87 billion in 2020.
  • India did not export any services to Russia in 2020.
  • Russia rated 43 in the Economic Complexity Index (ECI 0.5) in 2020 and 13 in total exports ($330 billion). In the same year, India was placed 40 on the Economic Complexity Index (ECI 0.56) and 18 in total exports ($284 billion).


The analysis emphasized the anticipated trade changes resulting from the war between Russia and Ukraine and the excellent picture for containerized commerce in 2023 despite a meager 0.7% year-over-year (y/y) growth in 2022, which was driven by the predicted slowdown in the second half. 

According to a new S&P Global Market Intelligence report published on Tuesday, India has emerged as a significant trade partner of Russia. It is anticipated to continue being so in 2023, despite significant bilateral trade volatility between Russia and nearly all other markets as a result of the conflict in Ukraine. The Big Picture 2023 Outlook Report Series from S&P Global Market Intelligence includes the recently released "Global Trade Outlook" report.


"The trade value of all imports from Russia has risen recently, mainly due to higher prices for oil, gas, and coal as well as increases in imports from numerous nations. India, which observed a monthly increase in Russian import trade values of more than 100% year-over-year after the Russia-Ukraine crisis began in February 2022, is the group's leader, according to Agnieszka Maciejewska, an economist with S&P Global Market Intelligence.

As a result of the war between Russia and Ukraine, the analysis emphasized the anticipated changes in the trade as well as the bright outlook for containerized commerce in 2023, despite a tepid 0.7% growth rate in 2022, which was a result of the expected slowdown in the second half of the year. Additionally, it emphasized the effects of the new IMO greenhouse gas reduction policies that will go into effect in 2023. The following are some of the report's other major highlights:


Specific global shifts happened in trade considering the same.

Trade trends throughout the world: India is predicted to have an increase in trade in 2023 due to its massive rise in Russian imports. Its anticipated trade value will rise by 3.5% y/y in exports and 1.3% y/y in imports, while its projected trade volume will rise by 3.8% y/y and 7.3% y/y, respectively. Mainland In 2023, China is anticipated to be Russia's top importer, followed by Turkey, Belarus, and Kazakhstan.


Nevertheless, the picture is far more uncertain due to China's economic slump. Western commercial partners will become less significant in commerce with Russia. If Russia restricts gas shipments to Europe in the winter of 2022–2023, this tendency will be even more apparent. Outlook for containerized trade: Following a 0.7% y/y rise in 2022, S&P Global Market Intelligence's Global Commerce Analytics Suite (GTAS) forecasting expects containerized trade to increase by 3.2% y/y in 2023.


With containerized exports accounting for more than half of mainland Chinese exports, this form of cargo could endure severe long-term consequences from the country's economic woes, a position unlikely to improve very soon.

IMO decarbonization targets: Beginning January 1, 2023, the marine industry, which relies heavily on fossil fuels, will comply with the IMO's new short-term greenhouse gas reduction requirements. This will almost certainly result in a more considerable average increase in marine logistics costs and a slowdown in global commerce and economic development.


India To Soon Begin Trade Settlement With Russia In Rupees, Says Export Body Chief

According to estimates, Russian oil exports to India have surged tenfold this year, and Russian crude oil now accounts for about 10% of India's imported oil consumption.


The State Bank of India has agreed to help the process, and India will soon begin settling commerce with Russia in rupees, according to the head of India's exporter association, the Federation of Indian Export Organizations (FIEO).

The statements by the trade body's president came just a few months after the Reserve Bank of India (RBI) revealed a method to settle payments for foreign commerce in rupees, particularly for India's exports.


"The RBI notice authorizing export-import transactions in Indian rupees is encouraging for exporters." This would enable us to enhance our shipments to nations experiencing severe foreign exchange shortages or those subject to sanctions," the trade organization said in a statement.

According to reports, India's exports to Russia plummeted by roughly a third during the first four months of the current fiscal year, while imports increased, owing primarily to an increase in inbound crude oil shipments.

According to estimates, Russian oil exports to India have surged tenfold this year, and Russian crude oil now accounts for about 10% of India's imported oil consumption. Against this context, it is commonly assumed that if the mechanism is successful, it will go a long way toward internationalizing the Indian currency rupee in the long run.

According to SBI Research, an unusual phenomenon is occurring in the global currency market, with a considerable increase in trade in oil and other commodities in currencies such as the Renminbi, Hong Kong Dollar, and Arab Emirates Dirham. 

"Dollar Distancing is finally taking place, and it is time for India to position the Rupee as a legitimate, secular alternative in a changing international order?" In the same report, SBI Research inquired.


According to SBI Research, the US dollar's share in global foreign exchange reserves has been declining since the turn of the century, falling close to 59% at the end of December 2021 from more than 70% two decades ago.


India-Russia Trade and Investment Relations

Russia has always been an essential partner of India, and its relationship with Russia is a cornerstone of India's foreign policy. Russia has aided India in crucial development projects such as the Bhakra Nangal multipurpose dam, the Bhilai steel mill, and IIT Mumbai.


India's engagement with Russia today encompasses all sectors of bilateral cooperation, including defense, education, commerce and economics, energy, and science and technology.

The signing of the "Declaration on the India-Russia Strategic Partnership" in 2000, during Russian President Mr. Vladimir Putin's visit to India, increased the significance of India-Russia commercial connections. During the Russian President's visit to India in 2010, the "Strategic Partnership" was advanced to a "Special and Privileged Strategic Partnership." Druzhba-Dosti was signed in December 2014 by Prime Minister Shri Narendra Modi and President Vladimir Putin as a vision for the next ten years.


Annual summits between India's Prime Minister and Russia's President are held regularly under the Strategic Alliance, with the goal of further strengthening the India-Russia partnership. So far, India and Russia have hosted seventeen yearly summits. The most recent summit was held in Goa in October 2016, where Prime Minister Modi and President Putin signed the "Partnership for Global Peace and Stability" Joint Statement, which resulted in 19 cooperation agreements in areas such as defense, space, trade, and investment, hydrocarbons, and railways.

Trade between India and Russia in the last ten years: India and Russia have always been significant trading relations. However, India's overall commerce with Russia has been relatively stable over the previous five years, hovering at about US$ 6 billion. Total commerce reached US$ 7.5 billion in 2016-17, representing a 22% increase.

 India's exports to Russia have climbed from 0.94 billion USD in 2007-08 to 1.9 billion USD in 2016-17. Indian exports peaked in 2012-13, with a total value of $2.3 billion. Indian imports from Russia, on the other hand, grew from US$ 2.5 billion in 2007-08 to US$ 5.7 billion in 2016-17.


Important Exports and Imports:

The trade basket between India and Russia is diverse. Gems and Jewelry (HS Code 71) led India's top imports from Russia in April-February 2016-17, accounting for 45.4 percent of the total. Petroleum, fertilizers, iron and steel, and paper goods were the main imports. The percentage shares of essential imports by category. 

Pharmaceutical items (HS Code 30) were the leading Indian export to Russia in the same year, accounting for 18% of all Indian exports to Russia. Machinery and components, drinks and spices, aircraft and parts, and organic compounds were all crucial exports. The percentage shares of important exports by category.


Investments on each side:

Numerous initiatives and bilateral investments are underway between the two nations. The historic collaboration between the two countries culminated in the world-class supersonic cruise missile BrahMos, for which each side contributed equal amounts totaling US$ 300 million. Another notable partnership has been the commissioning of India's newest and biggest aircraft carrier, INS Vikramaditya, into the Indian Navy in November 2013.


India is eager to secure long-term hydrocarbon supplies in the energy sector from Russia. The two nations want to develop nuclear power plants in Kudankulam, with units 1 and 2 finished and agreements for units 5 and 6 in the works.


Between 2000 and 2017, Russia invested a total of US$ 1.2 billion in India. Rosneft, Russia's state-owned oil company, and its partners paid $12.9 billion for Essar Oil, India's second-largest oil company. Aside from being India's most significant defense partner, Russia also assists India in establishing nuclear reactors.

As of December 2016, India's overall investments in Russia were expected to be approximately US$ 13 billion. In recent years, Indian firms have significantly invested in Russia's oil and gas industries. Several Indian oil companies have purchased shares in Rosneft's oilfields. ONGC Videsh Limited (OVL) finalized the acquisition of an additional 11% share in the Vankor oilfield for $930 million in October 2016, in addition to the previously acquired 15% stake for $1.26 billion. This considerably increased Indian investment in Russia.

Opportunities available: The two nations have enormous potential to strengthen economic relationships and move beyond the typical buyer-seller relationship. It is critical for India and Russia to increase private sector participation in their respective industries considerably, as well as to form collaborations for technology transfer and joint ventures in defense and nuclear energy components.


The Green Corridor, the International North-South Transport Corridor, and the India EAEU FTA might boost trade and investment. The CII has advocated for their early implementation. 

Russia might invest in infrastructures such as the Delhi-Mumbai Industrial Corridor, Smart Cities, trains, public transportation, urban rail, sanitation, and low-cost housing. Similarly, Indian firms could invest in Russian industrial parks in industries of interest to them.


ICT: Given that IT and services are India's main service exports, Russia might be a profitable market in the Information Technology and services industry. Indian firms may potentially investigate collaboration with Russian firms in the manufacturing software area. 

Pharmaceuticals: India's pharmaceutical exports to Russia account for a considerable portion of its total exports. Under Russia's Pharma 2020 program, top Indian pharmaceutical companies are considering collective investments. 

Defense manufacturing: Russia is India's principal supplier of defense equipment. The introduction of FDI in the defense industry in India has created several prospects for both nations. Under the new standards, Russia may want to explore establishing a separate industrial park for defense production to provide parts for helicopters, nuclear reactors, and solar panels.

Other possible fields of collaboration include fertilizers, gems and jewelry, and tourism.

Latest Trends On Indian-Russian Trade

  • In January 2022, Russia exported $591 million and bought $365 million from India, resulting in a $226 million trade surplus. Between January 2021 and January 2022, Russia's exports climbed by $246 million (71.5%), from $344 million to $591 million, while imports increased by $107 million (41.7%), from $258 million to $365 million.
  • Russia's main exports to India in January 2022 were Commodities not otherwise specified ($128M), Diamonds ($84.5M), Nitrogenous Fertilizers ($65.6M), Coal Briquettes ($41.1M), and Refined Petroleum ($37.6M). Packaged Medicaments ($32.8M), Telephones ($32.5M), Motor vehicles; parts and accessories (8701... ($12.5M), Nitrogen Heterocyclic Compounds ($11.6M), and Large Flat-Rolled Stainless Steel ($10.6M) were Russia's top imports from India in January 2022.
  • In January 2022, Russia's exports were primarily from the ASTRAKHAN REGION ($116 million), the REPUBLIC OF SAKHA (YAKUTIA) ($84.3 million), NIZHNY NOVGOROD REGION ($71.7 million), the VOLOGDA REGION ($59.5 million), and MOSCOW, THE CAPITAL OF RUSSIAN FEDERATION ($56.3 million), while imports were primarily from MOSCOW, THE CAPITAL OF RU
  • The year-on-year rise in Russia's exports to India in January 2022 was principally accounted by an increase in product shipments of Refined Petroleum ($19.7M or 135%), Broadcasting Accessories ($8.01M or 557%), and Other Electrical Machinery ($7.78M or 2.57k%). The increase in Russia's year-on-year imports from India in January 2022 was primarily explained by an increase in product imports of Other Heating Machinery ($9.14M or 1.65k%), Vaccines, blood, antisera, toxins, and cultures ($8.01M or 9.18k%), and Large Flat-Rolled Stainless Steel ($4.53M or 76.7%).

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