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1. Enhancing trade and economic cooperation between India and Russia is a key priority for the political leadership of both the countries. Bilateral trade has witnessed a positive growth despite the international financial and economic crisis and is on course to meet the target of USD 10 billion turnover by 2010. In recognition of the potential for enhanced cooperation, the Indo-Russian Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC) at its 15 session held on October 21, 2009, set a revised target of bilateral trade turnover of USD 20 billion by 2015. Indian investments in Russia are estimated to be about USD 6.5 billion, bulk of which are in the energy sector, while Russian investments in India total about USD 1 billion, primarily in telecommunications sector.
2. Institutionally, the IRIGC guides the conduct of economic cooperation at the Governmental level. A Joint Task Force is simultaneously monitoring the recommendations of a Joint Study Group to enhance trade and conclude, in future, a Comprehensive Economic Cooperation Agreement between the two countries. The Indo-Russian Forum for Trade & Investment has evolved into a platform for facilitating corporate interaction with a regular periodicity between the two countries. A CEO’s Council has been established to accelerate the role of the private sector in enhancing business cooperation between the two countries.
3. The President of the Russian Federation H.E. Mr. Dmitry Medvedev paid an official visit to India on 21-22 December 2010 at the invitation of the Prime Minister of the Republic of India H.E. Dr. Manmohan Singh for the 10th Annual Summit meeting under the India Russia Strategic Partnership. During the visit, the following IGA/MOUs, inter alia, were signed between the Governments of India & Russia:
Inter-Governmental Agreement between the Government of the Republic of India and the Government of the Russian Federation for Enhancement of Cooperation in Oil and Gas Sector.
MOU between Ministry of Communications & Information Technology (Department of Information Technology) of the Republic of India and the Ministry of Telecom and Mass Communications of the Russian Federation on Cooperation in Information Technology.
Memorandum of Understanding on cooperation in the Pharmaceutical Sector between the Ministry of Chemicals & Fertilizers of the Government of India and the Ministry of Trade & Industry of the Government of Russian Federation.
Trade
4. Bilateral trade between India and Russia has been growing but is still modest compared to the sizes of the two economies and their potential. In 2009, bilateral trade turnover amounted to USD 7.46 billion, an increase of 7.4% despite the economic crisis. Bilateral trade in January-October 2010 increased by 19.68% (YoY) and amounted to US$ 6.85 bn with exports worth US$ 5.14 bn and imports worth US$ 1.7 bn. During the 15th session of India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation, held in Moscow on October 21, 2009, the two countries agreed to set a new target of bilateral trade turnover of USD 20 billion by 2015.
5. Bilateral trade figures since 2000 are given below. Major items of trade are given in Annex-I.
Year India’s Import from Russia in US $ billion India’s export to Russia in US $ billion Total trade in US $ billion Increase YOY
| Year |
India’s Import from Russia in US $ billion |
India’s export to Russia in US $ billion |
Total trade in US $ billion |
Increase YOY |
| 2000 |
1.081 |
0.555 |
1.636 |
|
| 2001 |
1.117 |
0.543 |
1.660 |
1.47% |
| 2002 |
1.628 |
0.515 |
2.143 |
29.10% |
| 2003 |
2.735 |
0.584 |
3.319 |
54.88% |
| 2004 |
1.554 |
0.631 |
2.185 |
(-)34.17% |
| 2005 |
2.314 |
0.784 |
3.098 |
41.78% |
| 2006 |
2.987 |
0.968 |
3.955 |
27.66% |
| 2007 |
4.011 |
1.309 |
5.320 |
34.51% |
| 2008 |
5.231 |
1.715 |
6.946 |
30.56% |
| 2009 |
5.936 |
1.523 |
7.460 |
7.4% |
| 2010 (Jan-Oct) |
5.14 |
1.71 |
6.85 |
19.68% (YOY) |
Source: State Customs Committee of the Russian Federation.
C. Investment
6. According to RBI figures, India’s cumulative investments in to Russian economy amounted to USD 4.23 billion (from 1 April 1960 to 30 June 2010) whereas Russian cumulative investments into Indian economy amounted to Rs. 2142 crores (from 1 April 1991 to 31 March 2010). Additionally, ONGC Videsh Limited has also acquired Imperial Energy.
7. Major investments from India to Russia are of:
(i) ONGC Videsh Ltd. in Sakhalin-1 Project and Imperial Energy.
(ii) ICICI Bank for opening subsidiary ICICI Bank Eurasia
(iii) SBI and Canara Bank for opening JV Commercial Bank of India Ltd
(iv) TATA Motors- Assembly of small capacity lorries and buses
(v) SUN Group-Food processing industry and real estate.
(vi) Carborandum Universal- production of abrasives
(vii) Tata Tea
8. Major investments from Russia to India are of:
(i) AFK Sistema in Sistema Shyam Telelink Services.
(ii) India-Russia JV for production of titanium products in Orissa
(iii) Opening of branches by VTB and Sber Bank
(iv) Joint venture automotive company between Russian Kamaz Inc and India’s Vectra Group
D. Institutional Framework for Bilateral Economic Cooperation
9. The main reason for relatively low level of economic cooperation between our two countries is inadequate direct business-to-business contacts. Several initiatives have been undertaken to promote establishment of new business-to-business linkages. These include establishment of the India-Russia Forum on Trade and Investment in 2007 and the CEOs’ Council in 2008. Further, beginning 2010, the two sides have agreed to have enhanced Indian participation in the prestigious St. Petersburg International Economic Forum. The institutional framework of G2G and B2B interactions and exchanges is given below:
I. Government-to-Government
10. The India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC-TEC) is the apex G2G forum for bilateral economic cooperation. IRIGC-TEC is chaired by the External Affairs Minister from the Indian side and Deputy Prime Minister Sergei Sobyanin from the Russian side. The IRIGC integrates inputs from six working groups on economic and trade cooperation, mines and metallurgy, energy, tourism and culture, science and technology and IT and a sub-group on banking and financial matters. The 16th Session of IRIGC-TEC was held in New Delhi on 18 November 2010 during which, the two sides agreed to take further steps for enhanced cooperation
11. An India-Russia Joint Task Force(JTF) has been constituted to monitor the implementation of the recommendations of India-Russia Joint Study Group (JSG) which was set up to work out a programme for enhancing the bilateral trade to USD 10 billion by 2010 and to explore the possibility of a Comprehensive Economic Cooperation Agreement between the two countries. The JSG report, which was submitted in 2007 and is a public document (available on the website of Department of Commerce of India http://commerce.nic.in/), covers all areas: trade in goods, trade in services and promotion of investment.
12. There is also an India-Russia Joint Task Force on Settlement of Mutual Financial Obligations which is co-chaired by Ministries of Finance of the two countries. This JTF has so far met on five occasions, last meeting held in New Delhi on 18-19 May 2010.
II. Business-to-Business
13. Conscious efforts are being made by both India and Russia to promote establishment of new contacts and wider cooperation between commercial and industrial circles and business associations of the two countries. The main institutional arrangements are as follows:
(i) An India-Russia Forum on Trade and Investment has been established since 2007 which has met four times (12-13 February 2007 in New Delhi; 12-13 February 2008 in New Delhi; 29 September 2009 in Moscow; 20 December 2010 in New Delhi) with wide business participation from both sides. In the last session, the Indian business delegation was led by Shri Anand Sharma, Minister of Commerce & Industry, whereas the Russian business delegation was led by Mr. Sergei Ivanov, Deputy Prime Minister of the Russian Federation. The Forum has acquired its own identity as a platform for enabling corporate interaction between the two countries.
(ii) In order to provide a mechanism for the corporate vision to drive the investment climate between the two countries, a CEO’s Council has been set up in 2008 which includes corporate leaders from both countries representing all key sectors. The Council has so far met twice on the margins of the Annual Summits in 2008 and 2009. The CEO’s Council is a private sector driven mechanism that can accelerate the utilization of economic opportunities between the two countries. It is Co-Chaired by Mr. Mukesh Ambani, Chairman, Reliance Industries Ltd., from the Indian side, and by Mr. Vladimir Evtushenkov, Chairman, JSFC Sistema Corporation, from the Russian side. Composition of the CEOs Council is at Annex-II.
(iii) India and Russia have agreed to have enhanced Indian participation in the prestigious St. Petersburg International Economic Forum (SPIEF). CII and SPIEF Foundation have entered into a MOU for regular institutionalized B2B interactions and exchanges. Mr. Anand Sharma, Minister of Commerce & Industry, led the Indian delegation to SPIEF 2010 on 18-19 June. The first-ever India-Russia Business Dialogue within the framework of SPIEF was held on 17 June. A high-level business delegation led by the President of CII, Mr. Hari Bhartia participated in the dialogue. The participants included business leaders representing key sectors of India-Russia economic cooperation, including energy, infrastructure, IT, pharmaceuticals and diamonds.
(iv) The leading business chambers of India and Russia have entered into partnership agreements: CII with Russian Union of Industrialists and Entrepreneurs (RUIE); FICCI with Russian Chamber of Commerce & Industry (RCCC). An India-Russia Chamber of Commerce has also been established in 2008 which focuses on small and medium enterprises.
(v) Regular participation by business representatives in the exhibitions, fairs being held in each-other’s countries. Within the framework of the Year of India in Russia 2009, an 'India Show' was organized by ITPO in St. Petersburg on 30 September 30-3 October 2009. Over 150 Indian companies participated in the exhibition showcasing India’s capabilities in a range of sectors. The sectors covered included Engineering, Chemicals and Allied Products, Information Technologies, Electronic and Computer Software, Space Technology, Industrial Products, Textiles, Apparel & Garments, Handicrafts and Gift Items, Agricultural & Processed Food, Tobacco, Tea, Coffee, and Spices.
III. Banking Links
14. Development of banking links between India and Russia has witnessed some concrete progress. Several Russian banks have opened their Representative Offices/Branches in India. These include VTB, Sber Bank, Vnesheconombank, Promsvazbank and Gazprombank. Similarly, two major Indian Banks (SBI-Canara Bank JV and ICICI) are providing banking services in Russia.
E. Priority Areas for Cooperation
15. Sectorally, a number of areas have been identified where there is complementarity and we seek to intensify our cooperation: These include: hydrocarbons, IT, pharmaceuticals and biotechnology, metals and minerals, fertilizers, food processing, construction and engineering services, financial services, tele-medicine, and machine building.
16. There are strong complementarities in the energy sector between Russia and India. Russia can play a prominent role in our energy security. This sector also provides an excellent vehicle to achieve a quantum increase in bilateral trade, investment and business-to-business ties.
17. Cooperation in the area of nuclear energy has been proceeding well. During the visit of Russian President Dmitry Medvedev to India in December 2008, an agreement was signed for the construction of additional nuclear power plant units at Kudankulam and new sites in India. Subsequently, a Roadmap for the serial construction of Russian Designed Nuclear Power Plants in India was signed during Prime Minister Vladimir Putin’s visit to India in March 2010.
18. In the area of hydrocarbons, we have been actively promoting cooperation between oil and gas companies with a view to exploring the possibilities for participation of Indian companies in developing the energy resources in Russia. ONGC Videsh Ltd. has a 20% stake in Sakhalin-I. It has also acquired Imperial Energy in 2008 which has oil-producing assets in Tomsk. OVL has also set up Joint Study Group with Rosneft and a Joint Working Group with Gazprom.
19. In the pharmaceuticals sector, India has emerged as one of the most reliable suppliers of quality generic drugs to Russia, and potential for enhanced exports is promising. Our well-known pharma companies are represented in Russia. We are also actively exploring the possibility of setting up joint ventures in this area.
20. The potential for cooperation between India and Russia in the IT sector has been recognized by the leadership of both the countries at various high-level interactions including at the Annual Summit and during the visit of PM Putin to India. Russia is one of the fast growing IT markets in the world. Development of IT is one of the five strategic vectors identified by President Dmitry Medvedev for economic modernization of Russia. IT is also one of the focus areas in the new ambitious Skolkovo Innovation Centre which is the flagship project under the modernization programme. There is potential for collaboration between Indian and Russian companies in the areas of BPO/KPO, setting up of Techno Parks, IT learning, tele-medicine etc.
21. There is natural complementarity between India and Russia in the area of trade in rough diamonds - Russia as a major producer of rough diamonds and India as the leading processing center. During PM Vladimir Putin’s visit to India in March 2010, Russian company Alrosa concluded medium-term contract with three Indian companies for trade in rough diamonds.
22. There are significant opportunities for Russian companies in India particularly in the area of construction and engineering services. According to recent estimates, India will absorb about USD 1.7 trillion for infrastructure development over next 10 years.
18 January 2011
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Economic Cooperation 
