India and Russia have enjoyed a strong partnership for decades. This collaboration spans various domains, including politics, security, trade, and culture. In 2019, Prime Minister Shri Narendra Modi and President Vladimir Putin set ambitious trade targets, which have been surpassed with bilateral trade now exceeding $60 billion. During the recent visit by the PM to Russia, the two leaders have set a goal to elevate this trade to $100 billion by 2030, focusing on sectors like energy, agriculture, and infrastructure.
Despite growth, challenges remain, with India’s trade deficit widening due to increased imports of Russian oil. The Centre for Advanced Trade Research (CATR) has identified high-potential products for export to Russia. Addressing logistical challenges, such as operationalizing the International North-South Transport Corridor (INSTC), and negotiating a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU) can enhance trade prospects.
By leveraging strategic initiatives and focusing on high-potential products, India can strengthen its export growth to Russia, mirroring China’s success and ensuring mutual economic prosperity.
Russia and India have maintained a strong and enduring partnership over several decades, driven by strong diplomatic relations. trade ties and proactive people-to-people contact. Since the “Declaration on the India-Russia Strategic Partnership” was signed in October 2000, their relationship has evolved significantly, marked by increased cooperation across various domains including politics, security, defence, trade, economy, science & technology, culture, and people-to-people exchanges.
Intensifying the trade and economic relations has always been a priority area for Indian PM Shri Narendra Modi and Russian President Vladimir Putin. In 2019, India and Russia had set a target of increasing bilateral investment to US$ 50 billion and bilateral trade to US$ 30 billion by 2025. In fact, the trade has well exceeded this target and is well above US$ 60 billion presently.
During the 22nd Annual Bilateral Summit in Moscow, the two leaders have outlined plans to further elevate bilateral trade to over US$ 100 billion by 2030, emphasizing a strategic focus on economic collaboration, both leaders underscored the importance of boosting cooperation in sectors such as energy, agriculture, infrastructure and promoting trade in national currencies.
India-Russia trade trends
As per figures of the Department of Commerce, bilateral trade has reached an all-time high of US$ 65.7 billion in FY 2023-24. Despite a stable services trade, Russia maintains a trade surplus, amounting to US$ 1 billion in 2021. Bilateral investments have surpassed previous targets, with Russia investing in sectors like oil, gas, and banking in India, and Indian investments happening primarily in oil, gas, and pharmaceuticals in Russia.
India’s exports to Russia reached US$ 4.3 billion in 2023-24, while imports were recorded at US$ 61.4 bilion, thereby implying a trade surplus of US$ 57.2 billion in favour of Russia. Since the Ukraine war began in 2022, the dynamics of India-Russia trade have shifted significantly. Russia has become India’s leading oil supplier. If we eliminate oil (HS 27), India’s trade deficit looks far less daunting at US$ 2.6 billion. With increasing exports to Russia, India has a significant geopolitical opportunity to reduce reliance on the US dollar by leveraging the rupee trade mechanism. But if this trade imbalance persists, India might be compelled to consider using the Chinese yuan, contradicting its efforts to promote the internationalization of the rupee.
The widening trade gap with Russia has bolstered the yuan because China has effectively capitalized on export opportunities within Russia amidst stringent Western sanctions and the withdrawal of numerous Western companies and banks from the region’s economy. Chinese exports to Russia have outpaced imports of Russian oil, as evidenced by Chinese customs data indicating a 47% YoY increase to $111 billion in shipments to Russia in 2023. On the other hand, imports grew by 13% to US$ 129 billion. This balanced trade relationship has facilitated the predominance of domestic currencies in transactions. According to Russian government sources, around 95% of trade between China and Russia is conducted in yuan, making it the preferred currency in Russian transactions.
Source: Ministry of Commerce & Industry
Despite a significant increase in Russian imports from India last fiscal year, Indian exports such as pharmaceuticals and machinery have experienced sluggish growth. In response to sanctions imposed on Russian entities due to the war, New Delhi and Moscow have been endeavoring to conduct more trade settlements in roubles and rupees.
Top 10 exports from India to Russia by Value
| HS Code | Commodity | 2023-24 | 5-Year CAGR |
| 84 | Machinery And Mechanical Appliances.. | 650.27 | 26.31% |
| 30 | Pharmaceutical Products | 386.67 | -1.17% |
| 85 | Electrical Machinery And Equipment … | 347.79 | 2.69% |
| 29 | Organic Chemicals | 336.38 | 17.60% |
| 72 | Iron And Steel | 282.37 | 28.37% |
| 28 | Inorganic Chemicals; Organic Or Inorganic Compounds Of Precious Metals | 210.44 | 58.48% |
| 3 | Fish And Crustaceans | 149.42 | 14.46% |
| 90 | Optical, Photographic Cinematographic and Accessories… | 140.56 | 23.81% |
| 38 | Miscellaneous Chemical Products. | 138.11 | 20.84% |
| 69 | Ceramic Products. | 134.19 | 82.88% |
Source: Ministry of Commerce and Industry (US$ Mn)
Major items of export from India include pharmaceuticals, organic chemicals, electrical machinery and mechanical appliances, iron & steel, while imports are led by oil and petroleum products, fertilizers, mineral resources, precious stones and metals, vegetable oils, etc. The commitment to deepen economic ties reflects shared strategic interests, positioning both countries for substantial growth in bilateral trade and investment by the end of this decade.
Fastest growing exports from India to Russia
Source: Ministry of Commerce and Industry,
Economic Scenario
India has viewed Russia as a reliable partner that has consistently backed it at the United Nations (UN), contributed significantly to bolstering Indian military capabilities across various domains, and provided the latitude to exercise strategic autonomy in relation to the West. During the recent bilateral meeting, a joint statement underscored cooperation across 9 critical areas: political and strategic relations, military and security collaboration, energy, science and technology, trade and investment, nuclear affairs, space exploration, cultural exchanges, educational initiatives, and humanitarian cooperation.
With improving relations, there is an opportunity to enhance trade promotion in sectors with substantial growth potential. Centre for Advanced Trade Research analysed the highest potential products for exports to Russia by first shortlisting 23 products at HS 2 digits whose exports were higher than the average export value from India to Russia (at the 2-digit level). These products accounted for over 86% of a composite trade potential index based on two factors:
a) India’s 5-year export CAGR to Russia greater than Russia’s 5-year import CAGR from the world
b) India’s market share in Russia
For most of the products, India’s exports are growing faster than Russia’s overall imports, but with the exception of pharma; coffee, tea, mate and spices, and vehicles other than railway or tramway. The potential of pharmaceuticals is well established, however, and it is a key sector of focus. It’s negative CAGR of -2% over the past 5 years does not aptly reflect the industry’s potential in the Russian market. Based on calculated CTPI, the top 10 products with the highest potential are given in the table below:
Top potential products for exports by India to Russia
| HS Code | Product label | India’s exports in 2023 (in US$ mn) | Russia’s total imports in 2023 (in US$ bn) | Composite Trade Potential Index (CTPI) |
| ’69 | Ceramic products | 116.4 | 1 | 62.40% |
| ’28 | Inorganic chemicals | 208.9 | 3.7 | 54.30% |
| ’72 | Iron and steel | 324.9 | 3.2 | 32.80% |
| ’32 | Tanning or dyeing extracts… | 67.1 | 1.1 | 24.80% |
| ’38 | Miscellaneous chemical products | 150.4 | 3 | 23.90% |
| ’84 | Nuclear reactors, boilers, machinery… | 580.9 | 38.9 | 23.30% |
| ’90 | Optical, photographic, cinematographic… | 125.3 | 7 | 22.00% |
| ’39 | Plastics and articles | 77.7 | 8 | 21.00% |
| ’24 | Tobacco… | 69.5 | 0.9 | 19.30% |
| ’73 | Articles of iron or steel | 53.8 | 4.4 | 18.80% |
Source: ITC Trade Map; CATR analysis
While the deficit is huge, it is noteworthy that India has reportedly saved approximately US$ 13 billion by importing discounted crude oil from Russia over the past two years, as indicated by a study conducted by ICRA. Share of Russia in India’s oil imports rose to 35% in 2023-24 from 23% in the previous year, while shares of other suppliers like US, Iraq, Saudi Arabia and UAE declined. This is attributed to Russia offering highly discounted prices, especially after Western nations turned away from Russian crude, benefiting both India and China the most. Industry estimates suggest that the discount on Russian crude was over $30 per barrel in 2022 but has decreased to below $5 per barrel by 2024. For the past 2-3 years, the share has shrunk further.
Both countries have shown commitment to eliminate non-tariff and tariff barriers, especially in marine products and pharmaceuticals with initial negotiations for a goods FTA between India and the Eurasian Economic Union (EAEU), comprising Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia launched in March 2024. They have also instructed officials to explore the possibility of negotiating bilateral agreements for services and investments.
In a bid to enhance trade and investment cooperation, both sides have emphasized intensifying efforts in Russia’s Far East and Arctic zones. They welcomed the signing of the India-Russia cooperation program in the Russian Far East (2024-29), focusing on agriculture, energy, mining, pharmaceuticals, and maritime transport. Russian initiatives, such as inviting Indian investors for high-tech projects in the Territories of Advanced Development, were appreciated by the Indian side.
The cooperation framework includes India’s participation in key Russian economic summits like the Saint Petersburg International Economic Forum and the Eastern Economic Forum. These forums have facilitated the India-Russia Business Dialogue, crucial for boosting bilateral trade and investment cooperation.
Looking Forward
With the current trajectory, if Russia maintains its advantage in a fiercely price competitive oil market, reaching the US$ 100 billion trade target will not take much time. But the critical challenge for India is to try and bridge the huge trade deficit to the extent possible.
One key area to be addressed in this regard is the logistical challenges of sending goods to Russia. Operationalising the International North-South Transport Corridor (INSTC) which is a 7,200-kilometer multi-modal route linking India with Iran, Azerbaijan, Russia, Central Asia, and Europe can play a path breaking role in this regard. It is expected to reduce transit time between India and western Russian ports drastically from 45 to 25 days. Furthermore, it can cut freight costs by 30% compared to the Suez Canal route (which is facing severe disruptions of late). Last month, Russia sent two trains loaded with coal to India via the INSTC.
Emphasizing the potential mutual benefits of enhancing trade ties between India and Russia, opportunities in sectors such as electronics, engineering goods, and various export commodities were also highlighted in the meet which underscores the ongoing efforts to address barriers and explore new avenues for cooperation between the two nations. Efforts towards the FTA are progressing, with chief negotiators finalizing terms, while India continues to stress the significance of a rupee-rouble trade mechanism amidst Western sanctions on Russia.
An FTA could help address some significant NTBs faced by India. For instance, a report by GTRI highlighted that veterinary pharmaceuticals, feed Additives and machinery are facing high NTBs. For veterinary pharmaceuticals and feed additives, firms need prior registration and have to pay an average of Euro 3,000 per product. Pharmaceutical companies have highlighted significant challenges including compliance with standards and registration procedures, navigating diverse distribution channels and language barriers. In the case of machinery, firms must obtain a technical report called ‘technical passport” from European inspection firms paying exorbitant fee as no Indian firms are authorised to do so.
Finally, India needs to have a very focussed approach hinging on sectors that can benefit from its export promotion initiatives. CATR has identified some such product chapters at the HS 2-digit level based on market growth and India’s current market penetration. Further analysis at the tariff line level will provide a clearer understanding of potential products that must be supported to succeed in the Russian market.
