View of A VIEW ON THE HISTORY OF THE INDO RUSSIAN TRADE AND ECONOMIC LINKAGES DURING THE 21ST CENTURY

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Vol. 05, Special Issue 04,(ICMCSEH)June 2020 Available Online: www.ajeee.co.in/index.php/AJEEE

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A VIEW ON THE HISTORY OF THE INDO RUSSIAN TRADE AND ECONOMIC LINKAGES DURING THE 21^ST CENTURY

Raiees Ahmad Mir,

Ph.D Research Scholar, DAVV, Indore, M.P.

Abstract:- The Research Paper focuses on the Indo Russian Trade & Economic Interactions during the 21^st century. This analyses the earlier relations of the two nations & also highlights some points regarding the Soviet Union role in India‟s Industrialization.

Keywords: India, Interactions, Russia, Armenians, USSR, commodities.

1. INTRODUCTION

The economic and trading relations between India and soviet union dates back to fifteenth century, when Armenian merchants had established trade relations with the Indian people.

In the 17th century, A group of Armenians settled in Kolkata and played an important role in the economic life of the country. Indian traders were also active at Astrakhan and in the Volga-Delta - region during the same period. Indian black pepper, ginger, sandal wood, handlooms and other commodities were thus, well-known in ancient and medieval- Russia.

After the victory of the great October socialist revolution in Russia, the first soviet products to enter the Indian market, in 1925, were crude- oil, petrol, kerosene, and sugar.

but trade contacts between the two countries were reduced to nil by the British colonialists.

However, the first soviet trade agency was established in Kolkata in 1943 and her trade ties with India ,though very much restricted, revealed the wide potential of expansion once India gained independence.

Since 1950s a sea change has come about in both the direction and the composition of India‟s foreign Trade. For this indo-soviet economic cooperation has been, to a large extent, Responsible. Moreover, the indo-soviet cooperation has been the initiator of a number of novelties in bilateral trade relations.1 India and the former Soviet Union had close political and economic ties for over four decades before the dissolution of the USSR.

The Soviet Union played a major role in the development of several basic industries in India including steel, mining, heavy engineering, power and so on.

It was an important trading partner of India accounting for 12-15 percent of Indians foreign trade. Even after the disintegration, sustained close and friendly political relations built over the previous decades. There are no conflicts of interest between India and Russia, and what is equally significant is that there is commonality of views between the two countries on various international issues. Now with standing these positive elements in the relations between the two countries, economic ties between the India and Russia are far from satisfactory.

Since the early 90s, there has been a tapering down of trade between India and Russia and today it is less than US$ three billion. The trade relations between India and the Russia are not living up to real potentials. Overall strategic partnership will weaken if the trade aspect of the indo Russian bilateral relations is not given a boost. At the governmental and political level, there is a definite desire to establish business to business partnerships.

The Indian government too is willing to take initiatives to carry the dialogue and iron out the differences between the two countries .The Russian side too is dealing with the technical- problems it is facing .The dissolution of soviet union in1991 was the primary reason for a slowdown in trade and relations between India and Russia .However, as the Russian economy has stabilised ,relations with India too have accelerated, if not in substance, at least in intent.2

2. INDO-RUSSIAN TRADE AND ECONOMIC RELATIONS DURING COLD WAR PERIOD During the cold war period, Indo-Soviet Relations were initially indifferent, but later those were called special. In the last phase of Stalin era, The soviet union tried to explore trade relations with India. Their participation at the international trade fair held in Mumbai in, January -1952 was led by then president of the Ussr chamber of commerce, M.V.

Nesterov. He offered that the soviets were prepared to supply various machine tools, Generators, Electric equipments, Agricultural–Machineries and such other things as Fertilizers and food grains.

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However, The Indian Government did not favourably respond to the soviet offer. In November 1955, the representatives of the USSR Academy of sciences attended the Indian industries Fair, Held in New-Delhi and shared their ideas on the peaceful uses of Nuclear- Energy. On ideological plane, India‟s preference for planned economy was in consonance with the soviet Model of economic development. The soviet union Offered assistance for India‟s second five year plan in September, 1954.3

At the Time of independence, India was pre-dominantly an agrarian country with agriculture accounting for 49 percent of national income and 70 percent of employment in the country .Industry that accounted for 17 percent of the national income was dominated by group –B (light-industry) with small scale enterprises and cottage industry contributing 60 percent of total industrial production .India‟s first prime Minister, Jawaharlal-Nehru wanted to eliminate economic backwardness and bring about economic modernization of the country by developing heavy industry in the state sector through five year plans.

Since Indian private capital at that point of time was not able to invest in heavy industry. Nehru wanted to build heavy industry in state sector through mobilization of funds by the state. Nehru‟s concept of economic development stressed that state should occupy commanding heights in the economy. For this he found soviet experience quite useful and relevant.

The first Bilateral – Agreement between India and the Erst-while Soviet union was signed on 2, February 1955 for building Bhilai-steel plant with a capacity of one million tonnes with soviet Assistance, The first trade agreement between the two countries was signed in 1953 for achieving a trade turnover worth 13million rupees.4

3. SOVIET ROLE IN INDIA’S INDUSTRIALIZATION

USSR also extended substantial assistance in building India‟s oil industry .In spite of a large territory with a potential for oil survey, Western oil companies , Interested in keeping India as a market for their products , were affirming that there existed no oil in India.

However, advent of soviet specialists changed the scenario in this sector .Soviet specialists discovered more than 40 –oil and gas fields in India. The First oil deposit was discovered at combay in 1958 and Ankaleswar in 1960.

Former soviet union helped India in building oil refineries at Barauni and Koiyali as well. The oil refineries have also been set up with soviet assistance at Mathura and Guwahati. Soviet help to India in oil and gas sector covered the entire process starting from survey, and extraction to building and exploitation of oil Refineries, supply of equipment, Training of Specialists etc. In fact, Soviet assistance in creating India‟s premier state owned oil and gas company known as oil and natural gas cooperation ltd (ONGC) is commendable besides, Equipment for petroleum industry is produced in factories built with soviet technical knowhow.5

Disintegration of the former Soviet Union witnessed a dramatic decline in trade and economic relations between India and new –Russia with trade turn over falling from 5.5 billion US Dollars in 1990 to just 0.5 billion US dollars in1992. There are several reasons for this drastic fall. First of all Russia, Russia started unprecedented reforms in order to become a market economy. One of the major directions of Russia‟s market reform was elimination of state monopoly over foreign trade.

Where as in the past, Trade between the two countries was regulated by intergovernmental Agreements and protocols, This practice was abruptly abolished in since 1992 leaving the Bilateral trade completely dependent on market forces. Indo-soviet trade to remain which was based on intergovernmental agreements and protocols saw a free fall as a result of radical market reforms following the soviet Disintegration.6

4. INDO RUSSIAN TRADE AND ECONOMIC RELATIONS DURING POST COLD WAR PERIOD

The former USSR was an important trade partner of India. By developing the Rupee Trade, they kept foreign currencies out of all their trade transactions. As a result, trade between the two increased from rupees 1.3crores in1956 to Rs 71800 crores in 199091. India‟s exports increased from Rs. 1,226 crores in 1980-81 to Rs 5,255 crorers in 1990-91 and her imports increased from Rs 1,014 corers to Rs 2,548 crores during the same period. The USSR accounted for 17% of India‟s exports in1990-91. While USSR share in India‟s imports was 5.9%.

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India Obtained substantial Qualities of crude oil and kerosene and defence equipment and spares from Erstwhile Soviet Union. Other items imported from the USSR were ferrous and non- ferrous metals, news print, fertilizers and chemical products. India‟s exports consisted of processed foods, spices Jute and coir goods, hosiery, leather goods, paints, chemicals, cosmetics, tea, coffee, pepper, tobacco, drugs, and pharmaceuticals, detergents and toiletries.

India‟s dependence on the Soviet Union was substantial. What is more, there was a high degree of instability in the soviet demand .Nevertheless, Indo Soviet Trade lead to diversification of India‟s exports markets and better terms of trade.7 Russia is a resource rich and populous country, with a well educated and highly skilled labour force, whose economy is in transition from decades of central planning towards some form of predominantly market type economic system. Ever since, the disintegration of Soviet Union in 1991 into 15 independent republics, the economy of Russia has experienced a very severe decline in output, a decline that was probably reaching its low point by early 1997.

The financial crises of August 1998 further slow down the economic growth. Russia and India have had a long standing tradition of friendly relations. There are no irritants in the entire complex structure of the relationship, between the two. Both have been supporting each other in the UN and at other International fora. India and Russia are time tested old business partners and share common interest in the development of bilateral trade relationship. The Soviet Union where Russia was a part during communist period had a planet economy and had absolute state control on all buying and selling through its established state agencies and allocated all goods and services to the respective state of Soviet Union.

India-USSR trade turnover in 1991 was of US $ 5.5 billion. Indo-USSR trade was conducted in rupee based on annual trade plans. Following the breakup of USSR, Rupee Trading system was abandoned. Coupled with dismantling of central buying and selling system in Russia, disruption in industrial output and restructuring of the Russian economy, greater contact between Russian and western market , lack of presence of major Indian corporate sector in the market, Indo Russian Trade declined during 1992 and 1993.

Since then the bilateral trade continued to witness an upward trend till the economy was caught up with the financial crises in 1998.

The trade turnover which reached US $ 1.9 Billion in 1995-96 slumped to US $ 1.3 billion in 1998-99 a decline of 34%. The bilateral trade turn however, registered a positive growth of 25% in 1999-2000 Over the previous year. The reasons for positive growth could be increase in the import demand of agriculture products like rice, fruit pulps, juices and concentrates, potatoes, tea, coffee from India as the domestic production of these items were badly affected in 1998. Secondly due to the deterioration health conditions in Russia it is understood that there has been a great demand for medicines from India.

It is worth while mentioning here that apart from the official trade between the two countries substantial amount of Indian goods enter Russia either by way of shuttle Trade (Brought by Russians visiting India in a large numbers ) „or‟ through export of Indian origin goods to Russia from Singapore , Hongkong, Thailand, Malaysia and Middle East . Similarly, India purchases Industrial Raw materials of Russian origin (Example- metals, scrapes, fertilizers, paper and paper products) from Canada, USA and Israel due to absence of established Russian International marketing mechanisms.

Readymade garments (as a group), tea and drugs and pharmaceuticals products, together accounting for 45 %, are the major items of India‟s Exports to Russia , Tea continues to be the major export earning item-its share, however , has declined from 21%in 1997-98 to 17% in 1999-2000. Export of drugs and pharmaceuticals has shown an upward trend over the last few years. Other important items in the India‟s export basket to Russia include cotton yarn fabrics, made-ups (7%), coffee and tobacco (5%), and non basmati rice (4%).

As regards imports from Russia, fertilizers, Iron and steel and non-ferrous metals together Accounting for 51% enter the Indian Market. Fertilizers with 31% share during 1999-2000 continue to be the single largest item of import from Russia. Other principle items of import from Russia include newsprint (8%), coal and coke briquettes (7%), non- electrical machinery (5%) and primary steel and pig iron based items (4%). Coal, coke and briquettes and cotton raw and waste have emerged as new items of imports from Russia in 1998-99 and have indicated a substantial increase in 1999-2000.8

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According to some estimates in 1998, unofficial trade accounted to about $ 10 billion. Besides India, Hongkong, Singapore, Thailand, Turkey, Saudi- Arabia were other major countries from which shuttle trade was carried out. This shuttle trade was carried out through abnormal conditions prevailing in Russia and other former Soviet Republics.

But these fly by night operators often traded in substandard goods imported into Russia affecting India‟s image in the Russian market India exported pharmaceutical products to Russia.

But there were some issues and complexities involved. For instance, several ministries of the Russian government were involved in the release and use of funds-Ministry of finance. Ministry of Health, ministry of foreign economic relations, etc. Hence as observed by some experts contacting several Russian agencies with all uncertainties had become a task and hence may backdoor dealing with kickbacks continued to persist which affected healthy competition for promoting the Indo Russian trade.9

The Release of funds was irregular, which created problems for genuine trading firms. It appears that the registration of medicines for Indian firms in Russia was often time consuming. While even leading Indian pharmaceutical firms in Russia was often time consuming. while even leading Indian pharmaceutical firms had to spend 5-6 months in Russia for the Registration of medicines for imports into Russia, firms from the USA and west European countries took a couple of weak.

Hence although Russia badly needed medicines and established Indian firms were in a position to supply medicines much cheaper than from the west, some of to point out that some Indian small scale producers and trading firms adopted unfair promoting trade between the two countries. Some of these constraints were partly over come thanks to the initiatives taken by some major Indian pharmaceutical companies and by Russian specialists when Russian importing agencies visited Indian firms and laboratories in the second half of 1990‟s.

They were convinced about the high quality of Indian Mexicans as also the competitiveness of these companies in terms of price in the Russian Market as compared to western companies. Such efforts helped India to a greater extent to increase the exports of medicines and pharmaceutical-products to Russia as also to other common wealth of Independent states.10 The last Quarter of 2003 Witnessed some positive Developments in economic relations between the two countries. The confederation of Indian industry (CII) opened its office at the Russian chambers of commerce and industry in October 2003 to facilitate the process of economic cooperation.

During the visit of Prime Minister Vajpayee to Moscow in November 2003, 85 Indian business men accompanied him to study the prospects of investments and joint collaborations with Russian Companies.11 In 2006 a Joint Study Group was set up to work out a programme for increasing bilateral trade to $10,000m. by 2010, an-194.d to explore the possibilities. The Indian ICICI Bank has opened its subsidiary ICICI Bank Eurasia in Russia, with branches in Moscow and St Petersburg. TATA Motors launched a project to assemble its light-duty trucks at Russia‟s Urals Automobile and Motors plant and assembling plant for buses at Volzhanin and Samotlor.

The SUN group has also invested in Russia‟s food and real estate industries.

Similarly, pharmaceutical companies like Dr Reddy‟s Laboratories Ltd and Lupin Ltd have investments in Russia. Berger Paints has also started operations in Russia. Carborundum Universal has purchased an 84% share in Russia‟s Volzhsky Abrasive Plant in the Volgograd region.

Other companies that are exploring possibilities for investment in Russia include GAIL, Indian Oil, Coal India, Reliance and Tata Tea. Similarly, a few Russian companies are active in the Indian market. Silovyie Mashiny and Tekhnopromeksport are providing equipment and technical assistance for the construction of the Sipat thermal power plant in Chhattisgarh, Bihar and Uttar Pradesh.12

 Pharmaceuticals:- Russia is the 2nd largest export destination for Indian pharmaceutical products , after the united states .However ,While the US market is witnessing a negative growth , Indian exports to Russia have witnessed a negative 42% growth .India‟s ranking in Russia‟s market has fallen from 2nd position to 5th ,AFTER France , Germany ,Slovenia and Hungary. A Mckinsey report suggests that India‟s Pharma market will rise to US$25 billion by 2010,OF Which US$11 billion will consist of domestic sales .India is competitive in terms of production costs,

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setting up plants (it is 40%cheaper to set up plants in India ) and clinical research (35 to 40% savings in conducting research in India).Russia is the 8th largest Pharma market and 9th largest generic market in the world .Also, Russian demands for pharma products are rising as cardiovascular ,Respiratory, cerebro- vascular diseases are increasing .

 Energy:- Indian and Russian companies can expand collaborations and joint ventures in third countries in the energy sector .The security of supply and the security of demand will lead to a stable partnership.

 Third country cooperation:- Both countries could invest in coal /iron ore and the mining sectors, particularly in central Asia .During Prime Minister Monmohan Singh‟s visit to Moscow in 2005, both the countries agreed to explore oil and gas assets both in production and explorations in third world countries like the central Asian Region .

 High –technology:- cooperation with Russia is another area that India should keep pushing for such as in the area of coal gasification .A technology centre is proposed to be set up in Moscow that will help Indian companies to transform their ideas from the lab into a profitable business.

 Financial-Services:- The network of Russian Banks is very under developed in India ,and even though there are some Indian Banks in Russia ,much still needs to be done. The CII has already opened its office at the Russian chambers of commerce and industry in October 2003 to facilitate the process of economic cooperation .The Russia –India Business council may work to smoothen and enlighten the prospective business ventures in each other‟s countries and address issues such as Rigid Visa regime and Bureaucratic problems. The council would likely open new avenues of cooperation among the Business communities of the two countries.

Research & Development & the commercialisation of Technology: Both countries can well cooperate in this area. The real estate sector infrastructure, energy and machinery are some of the main sectors that the Russian side can invest in India. Hyper-Mechanical equipment is needed by India. There is also scope for cooperation in areas like – Mining sector, Textiles, particularly synthetic fibres, etc. Projects such as expansion of air links between India and Russia can also be undertaken .The announcement in 2006 of direct Flight from Amritsar to Moscow is one such step that would enable more accessibility, especially to the Businessmen from Punjab to Russia and vice versa.13

Indian Community in the Russian Federation is estimated at about 15,000. In addition, about 1,500 Afghan nationals of Indian origin live in Russia. About 500 Indian businessmen reside in Russia including about 200 businessmen who work in Moscow. An estimated 300 registered Indian companies operate in Russia. Majority of Indian businessmen/companies in Russia are involved in trading while some represent Indian banks, pharmaceuticals, hydrocarbon and engineering companies. Tea, coffee, tobacco, pharmaceuticals, rice, spices, leather footwear, granite, I.T. and garments are amongst the products being imported by these companies from India.14

In 2008 the Indian investments in the Russian economy amounted about 800 millions US dollars, including 20% participation of ONGC Videsh Ltd. in the Sakhalin-1 oil and gas project. The Russian energy sector is also hopeful of attracting attention of major Indian corporates like Reliance Industries Ltd. and Essar Group to the same kind of large- scale projects. TATA Motors has organized the assembly of its lightduty trucks at the Ural Auto Motor Plant and its buses at the Volzhanin and Samotlor plants. Murugappa Group has purchased an 84% stake in the Volzhskiy Abrasives Plant in the Volgograd Region.

Other Indian companies, including GAIL, Coal India Ltd., Jindal, Aditya Birla Group, Wipro, Infosys, TATA Consultancy Services, TATA Coffee and TATA Tea as well as SUN Group are exploring various investment opportunities in the Russian economy. Such institutions like chambers of commerce and industry and business associations are becoming one of the integral parts of trade and economic cooperation between Russia and India. They prove their efficiency and contribute a lot to establishment of mutually beneficial ties between private sector companies and to further extension of business-to- business relations.15

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59 5. CONCLUSION

In view of the long standing cordial, political and economic relations between India and Russia, The prospects of strengthening Indo-Russian trade ties are bright. More concrete steps need to be taken to boost Indo-Russian economic Relations. It is true that the economic cooperation between two countries is not commensurate with their Bilateral, Political and strategic cooperation, but it is nonetheless commendable. Besides sharing common concerns and cooperation in the areas of counter terrorism, Multi polar global structure, conflicts in Chechnya and Kashmir, The coming years would likely witness rapid developments in bilateral economic cooperation.

Sustained efforts need to be made woo the private economic players of both the countries in order to increase bilateral trade and economic relations .Ways and Means have to be found to diversify each other‟s export and import Baskets. Everything in the sphere of trade and economic relations should not be left entirely to the Market forces .If India and Russia are strategic partners, State intervention in promoting trade and economic ties is essential.

END NOTES & INTERNET SOURCES

1. Wadhwa. R.k, “Economic cooperation between India and Russia”, In Chopra .V.D,s ;( ed); Global- significance of Indo Russian –strategic Partnership, Kalpaz-pub, Delhi ,2005,p=199.

2. Hannes-Adomeit, “Russia as „Great power‟ in world affairs: limages and Reality”, International Affairs, vol- 71, No-1, January, 1995, pp=44-45.

3. Mavalankar. Anand. P, “The changing Matrix of Indo-Russian cooperation”, In Nazarkin. Andrei.M and Dash. P.L,s ;(edt);Indo-Russian Diplomatic Relations :Sixty Years Of Enduring Legacy, ,Academic – Excellence ,Delhi,Edition-ist-2008,p=488

4. Mohanty Arun, “Indo-Russian trade and economic cooperation”, Himalayan and central Asian studies ,Vol-12, No-02, April-June 2008,pp=51-52

5. Ibid P =54 6. Ibid ,p=56

7. Varshney. R.L, “Trade Relations between India and Russia”, In Chopra. V.Ds (Ed); New Trends in Indo Russian Relations, Kalpaz- Pub, Delhi, 2003, P=225

8. Dr. Wadhwa.R.K, Dr. Varshney. R.L, “Economic and Trade Relations Between India and Russia”, in Chopra. V.D‟s (ED.); Indo Russian Relations: Prospects, Problems and Russia today -,Kalpaz Publication, Delhi , 2001 PP=101-107.

9. The National Herald, 15 March 1997 10. The Hindustan Times, 24 March 1997

11. Dr Mahapatra. Devidatta. Aurbinda, “Indo-Russian Economic Cooperation: positing prospects for 21th century “, In Chopra .V.D,s (ed);Significance of Indo-Russian Relations IN the 21th century, Kalpaz-pub, Delhi,2008, p=190.

12. Sachdeva Gulshan, “India‟s relations with Russia”, IN Scott David (ed), Handbook of India‟s International Relations, Rout ledge Albert House, London , United Kingdom, Edition- Ist 2011,P=216

13. Mahapatra. Debidatta Aurobinda, “Indo Russian relations: Prospects of Economic Cooperation”, in Nazarkin. M. Andrei and Dash. P.L,s (ED.); Indo Russian Diplomatic relations: sixty years of Enduring Legacy, Academic Excellence, Delhi,Ed-1st 2008,pp =246-248

14. Please see “indo-Russian relations “On line web accessed on 03-03-2020,13;45, URL/

http://www.mea.gov.in/Portal/ForeignRelation/Russia_January_2014.pdf .

15. Sarkar Debashis, “Indo-Russia Relations”, on line web, Accessed on 10-03.2020,10:39, URL/http://www.academia.edu/2103282/Indo-Russia_Relations#.