India-Russia Economic Partnership: Strengthening Ties Across Trade and Investment

India and Russia established a Strategic Partnership Declaration in 2000, which was elevated to a Special and Privileged Strategic Partnership in 2010. Strengthening trade and economic relations has been a priority for governments in both countries, with targets set to boost bilateral investment to US$50 billion and bilateral trade to US$30 billion by 2025.

In July 2024, during Prime Minister Narendra Modi’s visit to Russia, he was awarded the Order of St. Andrew the Apostle, Russia’s highest state honor, by President Vladimir Putin for “his contribution to fostering India-Russia ties”. The two leaders discussed enhancing economic collaboration in key areas, such as energy, trade, manufacturing, fertilizers, and streamlining customs processes. Strategic trade routes, including the North-South International Transport Corridor, the Northern Sea Route, and the Chennai-Vladivostok Sea Line, were prioritized.

New Delhi and Moscow have agreed to foster investments, launch joint projects, and expand cooperation in the digital economy and education sectors. India announced the opening of two new consulates in Kazan and Ekaterinburg and reviewed progress on nuclear energy projects, including the Kudankulam Nuclear Power Plant.

India-Russia bilateral trade highlights

Find Business Support

Grow Your Presence in Asia with Complete Market Entry and Cross-Regional Support

According to India’s Department of Commerce, bilateral trade between India and Russia reached a record high of US$65.70 billion in FY 2023-24, comprising India’s exports worth US$4.26 billion and imports from Russia amounting to US$61.44 billion. Key Indian exports include pharmaceuticals, organic chemicals, electrical machinery, mechanical appliances, and iron and steel. Major imports from Russia are dominated by oil and petroleum products, fertilizers, mineral resources, precious stones and metals, and vegetable oils.

Bilateral trade in services has remained stable over the past five years, with a trade balance favoring Russia. In 2021, it totaled US$1.021 billion.

In August 2024, India exported US$505 million to Russia and imported US$3.58 billion, resulting in a trade deficit of US$3.07 billion. Compared to the same period in 2023, exports grew by 42.7 percent while imports declined by 39.9 percent, showcasing India’s increased export volumes and reduced dependence on Russian imports, particularly in the energy sector.

Source: UN COMTRADE, Trading Economics

Source: UN COMTRADE, Trading Economics

Investment

Bilateral investments have been robust, surpassing the earlier target of US$30 billion in 2018, prompting a revised goal of US$50 billion by 2025. Russian investments in India are concentrated in sectors like oil and gas, petrochemicals, banking, railways, and steel. Meanwhile, Indian investments in Russia primarily focus on oil and gas, along with pharmaceuticals.

Find Business Support

Select Your Next Location for Manufacturing in Asia with Tailored Business Intelligence

India and Russia are negotiating a new investment treaty to strengthen trade and investment ties, replacing the 1994 agreement that ended in 2017. Talks commenced in July 2024 after discussions between Modi and Putin in Moscow. The new treaty will provide a modern framework aligned with India’s 2015 Bilateral Investment Treaty model, emphasizing investment protection, and supports a bilateral trade target of US$100 billion by 2030.

India has encouraged Russian firms to establish manufacturing units in its industrial hubs, while Russia has invited Indian investors to participate in high-tech projects.

Logistics and maritime connectivity

The Chennai-Vladivostok Eastern Maritime Corridor

The Chennai-Vladivostok Eastern Maritime Corridor (EMC) has officially become operational, facilitating the transport of oil, food, and machinery, as announced by Sarbananda Sonowal, Minister of Ports, Shipping, and Waterways, on November 18, 2024. The corridor significantly reduces cargo transport time between India and Far East Russia by up to 16 days, from 40 to 24 days, and shortens the distance by approximately 40 percent. Envisioned during the Eastern Economic Forum in Vladivostok in 2019, the EMC establishes a direct sea route between Chennai and Vladivostok, covering a distance of about 10,300 km and passing through strategic waterways such as the Sea of Japan, South China Sea, and Malacca Strait.

Key benefits

Find Business Support

Cross Country Competitiveness Benchmarking

The EMC is poised to deliver several benefits. It reduces logistics costs by cutting transportation time and distance, as the traditional Mumbai-St. Petersburg route via the Suez Canal takes 40 days and spans approximately 16,066 km. The corridor is also set to boost India’s maritime sector, which handles about 95 percent of the country’s trade by volume and 70 percent by value, while complementing the objectives of India’s Maritime Vision 2030, which encompasses over 150 initiatives to modernize the sector. Strategically, the EMC passes through the South China Sea, a region vital to China’s maritime dominance, and connects to Vladivostok, which is close to the Russia-China border. Furthermore, it supports India’s Act Far East Policy by offering greater access to Russian resources and strengthening India’s foothold in the Pacific trade network. The Chennai-Vladivostok corridor thus boosts bilateral cooperation and aligns with India’s broader geopolitical and economic objectives.

INSTC

The International North-South Transport Corridor (INSTC) encompasses three primary routes around the Caspian Sea, including the Trans-Caspian Route. This route connects Russian ports such as Astrakhan, Olya, and Makhachkala with Iranian ports like Bandar Anzali, Amirabad, and Nowshahr, serving as the main corridor for India-Russia trade.

INSTC, along with Chabahar Port, offers Eurasian states an alternative pathway to access the ocean, distinct from China’s Belt and Road Initiative (BRI), which infringes on India’s sovereignty by passing through Pakistan-occupied Kashmir (PoK).

Northern Sea Route

In October 2024, India and Russia convened the first meeting of their working group on the Northern Sea Route (NSR) in New Delhi, discussing a range of collaborative initiatives. These included training Indian sailors for polar navigation, joint Arctic shipbuilding projects, and setting cargo transit targets along the route. The working group, co-chaired by Rajesh Kumar Sinha, Additional Secretary in India’s Ministry of Ports, Shipping, and Waterways, and Vladimir Panov, Rosatom’s Special Representative for Arctic Development, was established following a decision during Modi’s visit to Moscow in July 2024.

During the July 9 summit, Modi and Putin emphasized cooperation on shipping between Russia and India via the NSR. The working group has since drafted a memorandum of understanding for the development of cargo shipping along this Arctic route. Recognized as the shortest link between western Eurasia and the Asia-Pacific, the NSR is strategically significant. Rosatom, Russia’s state-run atomic energy agency, was appointed as the route’s infrastructure operator in 2018.

The growing importance of the NSR has become evident considering continued disruptions to traditional maritime routes through the Suez Canal and the Red Sea due to geopolitical conflicts. Such disruptions have driven up transportation costs and insurance premiums. “India cannot afford frequent trade interruptions and is keen to explore alternative routes that save time and reduce costs,” an official speaking to media explained. The rising bilateral trade between India and Russia, which surged from US$7.5 billion in 2016-17 to over US$65 billion in 2023-24, largely due to India’s oil imports, further amplifies the need for reliable shipping corridors.

The NSR is crucial for ensuring India’s uninterrupted access to essential commodities such as coal, liquefied natural gas (LNG), fertilizers, and container cargo. It also aligns with India’s broader interest in alternative transportation corridors, including the Chennai-Vladivostok EMC, to secure energy supplies from Russia. Indian public sector enterprises like the Oil and Natural Gas Corporation (ONGC), which hold investments in oil and gas assets in Russia’s Sakhalin and Tomsk regions, stand to benefit significantly. The NSR offers a viable solution for transporting equity oil directly to Indian ports, reducing the need to sell these assets due to logistical constraints, per reporting in the Hindustan Times.

India-Russia DTAA

The India-Russia Double Taxation Avoidance Agreement (DTAA), effective since 1996, seeks to eliminate double taxation and reduce fiscal evasion. It applies to individuals and entities residing in both countries and includes modern provisions to align with international standards, such as measures to combat Base Erosion and Profit Shifting (BEPS).

Key features of the DTAA:

1. Residence and permanent establishment: Defines criteria for residence and establishes rules for permanent establishments to allocate taxation rights.
2. Taxation of income: Caps withholding tax rates on dividends, interest, and royalties at 10 percent, ensuring equitable tax practices.
3. Elimination of double taxation: Provides mechanisms such as tax credits and exemptions to prevent double taxation.
4. Exchange of information: Strengthens transparency and compliance by facilitating information sharing between tax authorities.
5. Beneficial ownership: Prevents misuse of treaty benefits to artificially lower tax liabilities.

Impacts of the DTAA:

• Promoting investments: Reduces uncertainty, encouraging cross-border operations and fostering bilateral trade.
• Preventing tax evasion: Enhances compliance through robust information exchange mechanisms.
• Ensuring clarity: Minimizes disputes by providing clear guidelines, fostering trust and cooperation.

Conclusion

The India-Russia partnership, anchored in frameworks like the Special and Privileged Strategic Partnership, the DTAA, and forthcoming investment protection agreement, reflects robust economic collaboration. Trade and investment initiatives, particularly in energy, infrastructure, and manufacturing, position both nations to achieve ambitious goals, including a US$100 billion bilateral trade target by 2030.

Discussions are underway to boost India’s exports through innovative models of cooperation. Connectivity initiatives have become pivotal to bilateral collaboration, with key projects including the International North-South Transport Corridor and the Chennai-Vladivostok Eastern Maritime Corridor. Additionally, both nations are dedicated to enhancing cooperation in the development of Russia’s Far East and collaborating on research, logistics, and training in the Arctic region. This partnership aligns Russia’s pivot to the East and its resource and technological strengths with India’s flagship initiatives like Atmanirbhar Bharat and ‘Make in India’.

• Previous Article India-South Africa Bilateral Trade and Investment
• Next Article