Indian merchandise exports to Russia flourished during the Soviet Union era when India and Russia shared special economic and trade relationships.
However, after the disintegration of Soviet Union in the early 1990s,
bilateral trade between India and Russia was severely affected. Economic changes took place in Russia and it became a market economy in 1992, ceasing to be a centrally planned economy. The Indian economy changed as well, ushering in the era of liberal economic polices. These changes affected the nature and character of
trade relations between Russia and India.
The
economies of India and Russia are diversifying and emerging at the same time. Significant rates of economic growth has been achieved by both India and Russia in the last few years – 6.9% in the case of Russia and 7% for India. This growth can be the very basis for increasing Indian merchandise exports to Russia. With the fall of the Soviet Union, the Russian economy is still not very stable and so Russians prefer buying foreign goods to local goods. This encourages Indian exporters to make their presence felt in Russia.
Indian and Russian governments had to renegotiate the full trade regime after the fall of the Soviet Union. Today,
bilateral trade between India and Russia takes place mainly in the form of payments in freely convertible currencies. An analysis of the bilateral trade shows that Indian merchandise exports to Russia are not growing at a steady rate over the last few years. In fact, it has been steadily declining – in 1999- 2000 it was US$ 951 million, in 2000- 2001 it was US$ 889 million, in 2001-2002 it was US$ 798 million, in 2002-2003 it was US$ 714 million, and in 2003-2004 it was US$ 597 million. Issues causing this downhill trend need to be addressed so that there is a greater flow of
Indian merchandise exports to Russia and only then the two countries will be able to reach their target of US$ 10 billion in total trade by 2010. The main items included in
Indian merchandise exports to Russia are:
- Tobacco and its by products
- Preparations of fruits, vegetables, and nuts
- Miscellaneous edible preparations
- Pharmaceutical products
- Tea, coffee, and spices
- Leather goods
- Readymade garments
The Confederation of Indian Industry (CII) expected
exports of pharmaceutical products to Russia to increase by 60% in 2004-07. But the export of tea to Russia has seen a decline, for it has come down to 80 mkg in 2001 from 86 mkg in 2000, according to the Chairman of the Tea Board, Mr N K Das. A similar decline has also been seen in the amount of other Indian merchandise that is being exported to Russia.
A major barrier in increasing
Indian merchandise export to Russia is the absence of short trade routes. As a result of which the Indian merchandise that reaches Russia becomes expensive. However, agreement has been signed on the
India-Russia Transport route and this may help in reducing the cost of
Indian merchandise exports to Russia.
If India and Russia wish to strengthen their long standing partnership, they have to increase their bilateral trade. And this can only happen if they exploit their comparative advantages.
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