India-Eurasian Economic Union (EAEU)

$58.9 Billion and Counting: The Indian Trade Deficit with Russia

India’s trade deficit with Russia has ballooned to a staggering $58.9 billion in 2024–25, a near tenfold increase from 2021. Far from being a temporary anomaly driven by surging energy imports, this imbalance exposes a structural fragility in India’s engagement with Russia and, by extension, the Eurasian Economic Union (EAEU). This is not the robust foundation one would expect as Delhi and Moscow discuss a free trade agreement (FTA) under the EAEU framework—an agreement ostensibly aimed at mitigating such asymmetries. The irony is palpable: while India aspires to greater connectivity and economic diversification through the EAEU, it finds itself dragged deeper into a skewed trade regime dominated by hydrocarbons.

Yet, the stakes are high. With its five members—Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia—the EAEU represents a $6.5 trillion market and a population of 200 million. For India, this bloc is not just an exotic trading partner; it is a geopolitical strategy, an energy gateway, and a hedge against over-dependence on Western markets and supply chains. But the roadmap to realizing these ambitions is littered with systemic and institutional roadblocks.

Where the Agreement Stands: Legal and Institutional Architecture

The Eurasian Economic Union was formalized in 2014 under the Treaty on the Eurasian Economic Union, with full implementation beginning in January 2015. Its governance is anchored in two key bodies: the Supreme Eurasian Economic Council, which comprises heads of state, and the Eurasian Economic Commission, which oversees coordination in policy areas like trade, tariffs, and technical regulations.

India’s proposed FTA with the EAEU has been in exploratory stages since 2019, with fresh urgency following Russia’s geopolitical estrangement from the West. The discussions, reviewed in Moscow in November 2025, center on tariff reductions across goods, targeting sectors like Indian textiles, pharmaceuticals, and electronics. Theoretically, this FTA aligns well with India’s vision for diversifying trade, particularly in synchrony with the International North-South Transport Corridor (INSTC) and the Chennai–Vladivostok maritime route—two infrastructure projects designed to slash transit costs between Eurasia and India.

However, the EAEU’s institutional asymmetry cannot be ignored. Russia dominates the bloc, controlling over 80% of its GDP. This dominance affects negotiations, as smaller members often defer to Moscow’s strategic priorities. Meanwhile, Indian exporters to these markets face non-tariff barriers (NTB), ranging from Byzantine customs regulations to inconsistent tariff classifications across EAEU member states.

Policy Intent vs Ground-Level Realities

While the government frames the proposed FTA as an instrument to unlock Eurasian markets, the realities on the ground tell a more complex story. Indian exporters, for instance, grapple with strict sanitary and phytosanitary (SPS) standards, particularly in agricultural exports to the EAEU. These standards, ostensibly framed to ensure food safety, often translate into de facto trade barriers due to inconsistent enforcement and lack of harmonization across member states.

Consider also the issue of underutilized trade agreements. As of today, India’s FTA utilization rate across existing partnerships remains abysmally low, pointing to structural weaknesses in domestic industrial preparedness. If industries fail to meet compliance benchmarks for EAEU markets, even the most liberal FTA tariff schedules will remain theoretical benefits. Supporting sectors like MSMEs, which constitute the bulk of India’s manufacturing backbone, will require targeted capacity building and access to cheap capital—a policy gap that persists even in India’s broader trade facilitation framework.

Most glaringly, energy imports threaten to eclipse all other aspects of India-EAEU trade. India imported a record 2.5 million barrels per day of Russian crude in 2024–25 post the Ukraine war-triggered global energy realignments. This single commodity accounts for nearly 80% of bilateral trade flows. Without clearer diversification strategies, India risks the FTA becoming a glorified mechanism for subsidizing energy procurement rather than a genuine trade partnership.

Structural Tensions: Beyond Tariffs

Geopolitical friction looms large over India’s deepening engagement with the EAEU. The bloc, led by a Russia increasingly isolated amidst Western sanctions regimes, places India diplomatically on thin ice. For Delhi, the tightrope walk between Moscow and Washington is less about delivering rhetorical platitudes of “multi-alignment” and more about practical constraint management. As NATO-aligned states deepen their scrutiny of Russian financial linkages, India’s active pursuit of an EAEU FTA risks drawing unwelcome attention to cross-border dependencies.

At the micro level, institutional coordination gaps also jeopardize the initiative. India’s trade negotiations involve a bureaucratic labyrinth that spans the Ministry of Commerce, Ministry of External Affairs, and nodal export promotion councils. Harmonizing inputs across these agencies delays not just the signing of agreements but the formation of cohesive strategies for their implementation. The EAEU, on its part, suffers from uneven internal governance. Variations in implementing uniform tariffs and mutual recognition agreements within its member states remain unresolved.

Learning from Vietnam: A Cautionary Comparison

Vietnam’s 2015 FTA with the EAEU offers a glimpse into both potential opportunities and pitfalls. Initially, the agreement spurred Vietnamese exports of electronics and agro-products to member states by leveraging tariff reductions. However, stiff bureaucratic barriers and Russia’s economic slowdown undermined its long-term benefits, with overall trade volume growth falling short of projections. For India, the takeaway is clear: tariff cuts alone will not drive trade. Streamlined customs procedures, transparent NTB frameworks, and enforceable dispute resolution systems are crucial for the FTA’s success.

The Metrics of Success: What to Watch

For the India-EAEU partnership to move beyond aspiration, several metrics warrant continuous tracking. Foremost is the reduction of the trade deficit with Russia, which could signal healthier diversification. Next is the percentage of duty-free access granted to Indian exports under the future FTA, especially in high-potential sectors like pharmaceuticals and electronics. Equally critical is the timeline for operationalizing physical connectivity corridors like the INSTC. Logistical efficiencies here could offset some of the cost disadvantages Indian exporters face compared to Chinese and EU competitors.

However, success will also depend on softer aspects of integration: from aligning quality standards to deepening cultural business links. The reach and scale of India’s economic diplomacy in EAEU capitals will play as pivotal a role as tariff negotiations or infrastructure deals.

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