In fiscal year 2022, India exported 3,139 items to Russia, including machinery, chemicals, marine products, and pharmaceuticals, valued at $3.14 billion. On the import side, India shipped in 1,225 items from Russia in fiscal 2022, including crude oil, petroleum products, precious stones, and vegetable oil, valued at $46.21 billion.
The latest collaboration between India and Russia at the Goa Shipyard Limited, in partnership with the Russian Export Center, aims to build 24 cargo ships in the Caspian Sea by 2027, with the first four ships to be launched in 2024.
Why is New Cargo Ship Deal Beneficial?
Speaking to Sputnik India, Dr. Swasti Rao, an Associate Fellow at the Manohar Parrikar Institute for Defence Studies and Analyses in New Delhi, discussed the potential impact of these cargo ships on India-Russia trade.
She highlighted the importance of establishing foundational and institutional mechanisms to support bilateral trade. According to Dr. Rao, this partnership is inspired by two key factors:
1.
India's economic diversification policy, which involves joining various global economic partnerships while keeping its options open;2.
Russia's rise as a significant trade partner in the energy sector following the conflict in Ukraine."This deal of 24 cargo ships for Russia could be a game-changer and enable Russia to use billions of Indian rupees stuck in Indian banks for payments for crude oil, paving the way for equitable trade for both nations. It's estimated that trade may reach up to $100 billion through such deals," Dr. Rao explained.
What Challenges Exist for India-Russia Trade?
While trade between India and Russia has grown, it has also faced challenges. To address trade deficits, India and Russia need to engage in new trade and financial mechanisms that can make trade more equitable. Dr. Swasti further says that such trade should go hand in hand with projects like the Eastern Sea Corridor and the International North South Trade Corridor.
“When these projects are combined with the latest orders for construction of cargo ships it is possible that a huge potential for Russia-India trade can be unlocked to reach its true potential,” Dr Rao said.
Dr. Rao also discussed the issue of logistical uncertainties. She stressed that India should not be dependent on Western nations for insurance or shipping, making the construction of these cargo ships even more crucial. These efforts indicate the potential for expanding India-Russia trade.
When Associate Fellow Dr. Swasti Rao was asked about the solution to the logistics issue that has arisen after the US sanctions, she said that the issue of Western sanctions remains a complex one. A realistic assessment needs to be made of the evolving nature of the sanctions regime, which has recently aimed to plug the loopholes in the current restrictions.
"The case of India purchasing crude oil from Russia at concessional rates despite Western sanctions has been a success story. India made profits on the concessional crude oil, refined it and sold it back to European countries at a higher price and thus Russia’s energy revenues increased,” the associate fellow said.
In conclusion, Dr. Rao suggested that such ventures are crucial for reducing logistic uncertainties and promoting equitable trade. India's commitment to connectivity projects around the world demonstrates its mature approach. Russia's emergence as a crucial trade partner bodes well for New Delhi and Moscow, with the potential for future growth.