OVERVIEW OF INDIA-RUSSIA ECONOMIC COOPERATION

A. Overview

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. 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 fifteenth 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 on a regular basis 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. There have been regular bilateral exchanges at the highest levels. Dr. Manmohan Singh, Prime Minister, paid an official visit to Russia on 15 – 17 December 2011 for the 12th Annual Summit. During the visit, India-Russia CEOs’ Business Meeting was presided by the Prime Minister Manmohan Singh and President Dmitry Medvedev. He was accompanied by Principal Secretary to Prime Minister, National Security Adviser, Foreign Secretary, Ambassador of India to the Russian Federation and Secretary, DIPP. The business delegations were led by Shri Ravi Kant, Managing Director, TATA Motors, from the Indian side and Mr. S.V. Kirienko, General Director, ROSATOM from the Russian side. Agreements signed during the visit to further strengthen bilateral economic cooperation are:

• Memorandum of Understanding between the Central Drug Standard Control Organization of India and the Federal Service on Surveillance in Healthcare and Social Development of the Russian Federation on assurance of quality, safety and efficacy of medicines.
• Memorandum of Understanding between the Competition Commission of India and the Federal Antimonopoly Service of the Russian Federation to promote cooperation in the field of competition policy.

Other high-level visits are as follows:

1. Shri S.M. Krishna, Minister of External Affairs led an official delegation for the 17th Session of India Russia Intergovernmental Commission on Trade, Scientific, Technical, Cultural and Economic Cooperation, in Moscow from 16-18 November 2011. Both sides noted the progress in cooperation in diverse areas including energy, information technologies and telecommunications, metallurgy, automobile industry, pharmaceuticals, gems and jewellery, banking and financial services, construction of roads and underground metro, science & technology, tourism etc. Both sides emphasized that there was a significant potential for cooperation in such areas as the mining industry, railways and water transport, aviation and shipbuilding, bio and nano-technologies, manufacture of fertilizers and chemical production, agricultural and food items, textiles etc.
2. Shri Anand Sharma, Minister of Commerce Industry & Textiles, visited Moscow to attend the 5th India Russia Trade & Investment Forum on 10 November 2011. He was accompanied by an official and business delegation. The Russian side was led by Mr. Sergei Ivanov, Deputy Prime Minister. During the Forum, the Heads of the delegation discussed the measures to be taken to further diversity bilateral trade and investment cooperation. Three new round tables were introduced on pharmaceuticals, commercialization & innovation of technologies and infrastructure.
3. Shri Anand Sharma, Minister of Commerce & Industry visited Russia on 18 – 19 June 2011 to participate in the XV St. Petersburg International Economic Forum. He was accompanied by a high-level business delegation.
4. Shri Ghulam Nabi Azad, Minister of Health and Family Welfare visited Russia from 27 – 30 April 2011 for the first Global Ministerial Conference on Healthy Life Style and Non-communicable Diseases organized under the aegis of WHO. He was accompanied by Secretary (Health).
5. Shri Beni Prasad Verma, Minister of Steel visited Moscow during 6-9 November 2011 with an official delegation. During the visit, an MoU was signed between NMDC and OJSC Severstal for the cooperation in the steel and mining sector.
6. Shri Sushil Kumar Shinde led the Indian delegation to St Petersburg, to attend SCO Head of States Meeting, on 7 November 2011 and held official meetings on the ongoing cooperation in the power sector.
7. Shri T.K.A. Nair, Principal Secretary to the Prime Minister, paid an official visit to Russia from 29 January to 02 February 2011 at the invitation of Russian Deputy Prime Minister Sergei Ivanov. He was accompanied by Secretary, Pharmaceuticals; Secretary, Information Technology; Secretary, Petroleum & Natural Gas; senior officials of MEA and PMO; as well as a high-level business delegation of CEOs/senior representatives of Indian IT and Pharmaceutical companies. During the visit, an India- Russia Business Meet was also organized in Moscow on 31 January 2011.
8. Dr. Sutanu Behuria, Secretary (Fertilizers) visited Moscow on 29 – 31 August 2011 to discuss issues regarding setting up of Joint Venture project/s for production of fertilizers and also long-term agreement with the country for supply of fertilizers to India.
9. Shri S.L Bunker, Secretary, Competition Commission of India visited Rostov on Don, Russia from 5 – 9 September to participate in the Competition Day and Associated Events.

4. There were other bilateral visits by officials from Ministry of Commerce, Ministry of Information & Communication Technology, Ministry of Petroleum & Natural Gas, Department of Science & Technology, Reserve Bank of India, MMTC, Ministry of Textiles, and Export Promotion

B. Trade

5. Bilateral trade has witnessed a positive growth despite the international financial and economic crisis. 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 fifteenth session had set a revised target of bilateral trade turnover of USD 20 billion by 2015. Russian trade with India in percentage terms works out to 1.11% of its total trade.

6. The bilateral trade during the period January – December 2011, amounted to US Dollar 8.893, with Russian exports amounting to US Dollar 6.094 billion and imports from India amounting to US Dollar 2.799 billion. Indian exports showed an increase of nearly 31% during 2011 and the Russian exports to India decreased by 4.66%, compared to the corresponding period in 2010. Major items of import from India include pharmaceutical products, machine equipments, vehicles and tools, agricultural food products, Textile products and fabrics, and readymade clothes etc. Major items of import from Russia to India include Machinery and mechanical appliances, transport equipments, vehicles, aircrafts etc, Fertilizers, Ferrous metals and articles thereof, Oil and Gas, Paper and paperboard.

7. Bilateral trade figures since 2000 are given below:

C. Investment

8. 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. A major part of these investments have utilized the Rupee- debt fund.

9. Both the Governments have undertaken initiatives to promote bilateral investments, primarily through facilitating high-level Government to business and Business to Business contacts apart from the on-going investment process in strategic sectors in both the countries. Investment cooperation has been envisaged within the framework of 17th IRIGIC 2011 in various sectors such as hydrocarbons, power, coal, nuclear power, fertilizers, IT, pharmaceuticals, mineral and metallurgy amongst others. The fifth India-Russia Forum on Trade & Investment 2011, emphasized on facilitation of cross-flows on investment and explore the possibility of investment cooperation through mutually identified projects.

10. Major investments by Indian companies in Russia are, ONGC videsh Ltd. in Sakhalin-I Project (US $ 2.2 bn); Imperial Energy (US $ 2.1 bn), Commercial Bank of India Ltd. (JV of SBI and Canara Bank); ICICI Bank for opening subsidiary ICICI Bank Eurasia; TATA Motors- Assembly of small capacity lorries and buses; SUN Group- energy and real estate; Carbonandum Universal – production of abrasives; Tata Tea; De Core; Choron Diamonds; L&T; Universal Food technologies (J.V. Gokul); Pharma companies such as Dr. Reddy’s Laboratories Ltd; Cadila Pharmaceuticals Ltd; Pharmasyntez; Unique Pharmaceutical Laboratories; Torrent Pharmaceuticals; Sun Pharmaceuticals.

11. Similarly, major Russia investments from Russia in India are by AFK Sistema in Sistema Shyam Telelink Services; India- Russia JV for production of titanium products; branches by VTB and Sber bank; JV between Russian Kamaz Inc and India’s Vectra Group. An MoU was signed between Severstal, Russia and NMDC in establishing 2 MTPA (expandable to 5 MTPA) Integrated Steel Plant in Karnataka, using Indian iron ores and Russian coking coal.

D. Institutional Framework for Bilateral Economic Cooperation

I. Government-to-Government

12. 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 Ivanov from the Russian side. The IRIGC integrates inputs from six working groups on economic and trade cooperation, energy, tourism and culture, science and technology and IT and a sub-group on banking and financial matters and sub group on conservation of tigers & leopards. The 17th Session of IRIGC-TEC was held in Moscow on 18 November 2011 during which, the two sides agreed to take enhance measures to boost economic cooperation. The 18th session of IRIGC-TEC will be held in India in 2012.

13. 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.

II. Business-to-Business

14. 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:

1. An India-Russia Forum on Trade and Investment established since 2007 has met five times with wide business participation from both sides. The fifth session was held in Moscow on 10 November 2011 during which the Indian business delegation was led by Shri Anand Sharma, Minister of Commerce & Industry, and the Russian business delegation was led by Mr. Sergei Ivanov, Deputy Prime Minister of the Russian Federation. A Business to Business Interaction was also organized during this visit, with the participation of leading business representatives from both Indian and Russian side. Indian side was represented by CII and FICCI and the Russian side was represented by Business Council for Cooperation with India, amongst others.
2. 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. Shri Anand Sharma, Minister of Commerce, Industry & Textiles led a 20-member CEOs’ delegation from CII to participate in the SPIEF 2011. Second India- Russia Business Dialogue was held on 16 June 2011 which was co-chaired by Shri Anand Sharma and Deputy Prime Minister Sergei Ivanov.
3. Engineering Export Promotion Council (EEPC) India organized a BSM on 31 March 2011 in Moscow. 14 Indian companies participated in the BSM.
4. A first ever “International Crop Science Conference and Exhibition, “ICSC 2011”, was organized in Moscow from July 4-5, 2011, by the Pesticides Manufacturers & Formulators Association of India (PMFAI), with the cooperation of CHEMEXCIL of India, China Crop Protection Industry Association (CCPIA), and the Russian Union of Crop Protection & Manufacturers along with the Russian Grain Union. 68 Indian companies, 45 members of PMFAI and 23 of CHEMEXCIL, had attended “ICSC 2011” and the linked Buyer-Seller Meet, with the aim of attracting new Russian buyers and partners.
5. Chairman, Apparel Export Promotion Council signed an MoU with Russian Union of Entrepreneurs of Textiles and light Industry on 21.6.2011 for cooperation in textiles and clothing industries. Chairman AEPC had led a seven member delegation consisting of Chairman (Export Promotion Committee), Secretary General (AEPC) and other prominent Executive committee and exporters from 19-24 June, 2011. This was followed by an Indian delegation represented by Mr. J.P. Dutt, Under Secretary, Ministry of Textile and Mr. Vijay Mathur, APEC, participated in Textillegprom-2011 in Moscow, from 26-29 September 2011.
6. Chairman Tea Board, Mr. Asit Tripathy, led business delegation including representatives from Tea Board, APEDA, Coffee Board etc to participate in World Food Moscow, held in Moscow from 13-16 September 2011.

III. Banking Links

15. 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

16. 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.

17. 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. Gazprom Global LNG Ltd. has concluded a Framework Sales-Purchase Agreement for LNG spot operations, with an Indian company Petronet LNG Ltd. and also with Gujarat State Petroleum Corporation (GSPC), Gas Authority of India Limited (GAIL) & Petronet LNG to supply 7.5-10 billion ccm. LNG per annum.

18. In the pharmaceuticals sector, where India has emerged as the most reliable supplier of quality generic drugs to Russia, potential for further cooperation is promising. Under Pharma 2020 programme of the Russian Government which aims at developing domestic production base, leading Indian Pharma companies have started engaging with Russian partners to consider possibilities of joint investments. Several B2B agreements were concluded during 2011 in this regard. During the Annual Summit 2011, Memorandum of Understanding between the Central Drug Standard Control Organization of India and the Federal Service on Surveillance in Healthcare and Social Development of the Russian Federation on assurance of quality, safety and efficacy of medicines was concluded for facilitating future cooperation in this sector.

19. The potential for cooperation between India and Russia in the IT sector has been recognized by the leadership of both the countries. 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. To create an opportunity for high-level interaction of Government and business leaders of the two countries to promote bilateral cooperation in this sector, Principal Secretary to PM had led an IT business delegation to Russia in Jan-Feb 2011. An Inter-Governmental MOU on Cooperation in Information Technology was also concluded at the Annual Summit 2010. A renewed emphasis to enhance bilateral cooperation in this sector would be one of the priorities in the future.

20. There is a 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. Further, it is expected that Alrosa will bring out an IPO in 2012 which will have the potential for Indian investors to participate.

21. 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.

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