On April 15, 2024, Russia’s First Deputy Prime Minister met with Prime Minister Narendra Modi in New Delhi to discuss enhancing bilateral trade and economic cooperation. The high-level meeting underscored the mutual intent to elevate India-Russia trade from USD 10 billion in 2023 to USD 30 billion by 2030, focusing on sectors such as energy, defense, pharmaceuticals, and technology. This diplomatic engagement aims to diversify India’s strategic partnerships amid global economic uncertainties and geopolitical tensions.

Legal Framework Governing India-Russia Trade Relations

India’s authority to engage in international trade agreements is constitutionally grounded in Article 253, empowering the Union government to legislate treaties and international agreements. The Foreign Trade (Development and Regulation) Act, 1992 provides the statutory basis for trade policy formulation and export promotion. Additionally, the Customs Act, 1962 regulates tariffs and import-export duties, while the Special Economic Zones Act, 2005 facilitates trade by enabling export-oriented industrial enclaves.

• Article 253 allows overriding state laws for international treaty compliance.
• Foreign Trade Act empowers the Ministry of Commerce and Industry to regulate trade policy.
• Customs Act governs tariff structures, crucial for managing India-Russia trade tariffs.
• SEZ Act incentivizes export growth through infrastructure and tax benefits.

Economic Profile of India-Russia Bilateral Trade

India-Russia bilateral trade reached approximately USD 10 billion in 2023, with an ambitious target of USD 30 billion by 2030 (Ministry of Commerce, 2024). India’s imports from Russia primarily include crude oil (1.5 million barrels per day as per IEA 2023), fertilizers (constituting 25% of India’s fertilizer imports), and defense equipment, where Russia accounts for 60% of India’s defense imports (SIPRI, 2023). Indian exports to Russia focus on pharmaceuticals, engineering goods, and IT services, with pharmaceutical exports growing at a 12% CAGR over the past five years (Pharma Export Promotion Council, 2023).

• India’s crude oil imports from Russia enhance energy security amid global supply volatility.
• Defense imports from Russia maintain India’s strategic military capabilities.
• Pharmaceutical and IT exports diversify India’s trade basket.
• India allocated USD 20 billion in 2023-24 budget to improve trade infrastructure and logistics.

Key Institutional Actors in India-Russia Trade Diplomacy

The Ministry of External Affairs (MEA) leads diplomatic engagement and trade negotiations with Russia. The Ministry of Commerce and Industry formulates trade policies and promotes exports, while the Department for Promotion of Industry and Internal Trade (DPIIT) facilitates industrial cooperation and investment flows. Regulatory oversight of Foreign Direct Investment (FDI) is critical for managing capital movement between the two countries. Independent institutions like the Stockholm International Peace Research Institute (SIPRI) and International Energy Agency (IEA) provide authoritative data on defense trade and energy imports, respectively.

• MEA coordinates diplomatic strategy and bilateral dialogues.
• Commerce Ministry drives trade policy and export promotion.
• DPIIT supports industrial collaboration and FDI facilitation.
• SIPRI and IEA offer empirical data informing policy decisions.

Comparative Analysis: India-Russia vs India-China Trade Relations

Critical Gaps in India-Russia Trade Relations

Despite strong diplomatic ties, India and Russia lack a comprehensive bilateral trade agreement, resulting in tariff and non-tariff barriers that constrain trade expansion. This absence contrasts with India-China relations, where formal Free Trade Agreements (FTAs) have facilitated smoother trade flows despite a large trade deficit. The lack of a formal trade framework limits tariff rationalization, dispute resolution mechanisms, and investment protections, impeding the realization of the USD 30 billion trade target.

• Tariff barriers increase costs for exporters and importers.
• Non-tariff barriers include regulatory and procedural hurdles.
• Absence of dispute settlement mechanisms reduces trade predictability.
• Competitive countries leverage FTAs to deepen economic ties.

Significance and Way Forward

Strengthening India-Russia trade ties through institutionalized agreements and infrastructure investment is vital for diversifying India’s strategic partnerships. Enhancing cooperation in energy, defense, pharmaceuticals, and technology sectors will mitigate geopolitical risks arising from overdependence on single partners. India’s USD 20 billion budget allocation for trade infrastructure should prioritize connectivity with Russia and Eurasian markets. Negotiating a comprehensive bilateral trade agreement could unlock tariff rationalization and investment facilitation, aligning with India’s broader economic diplomacy goals.

• Prioritize negotiation of a bilateral trade agreement to reduce tariff and non-tariff barriers.
• Expand joint ventures in energy (nuclear and hydrocarbons) and defense manufacturing.
• Leverage SEZs and logistics corridors to enhance trade facilitation.
• Strengthen institutional coordination between MEA, Commerce Ministry, and DPIIT for seamless policy implementation.