India plans to begin negotiations for a free trade agreement (FTA) with the Russian-led Eurasian Economic Union (EEU), which is expected to significantly increase trade between the regions, two people aware of the matter said, requesting anonymity.
“The FTA will improve trade between the Russian bloc and India,” this person added.
The EEU, comprising five post-Soviet states — Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan — has exchanged trade data with the Indian side ahead of negotiations, one of the persons mentioned above said.
“Both sides haven’t met yet. After the assimilation of data, the EEU and India are expected to meet for negotiations in the next stage to take the process forward,” the person added.
There is a willingness from both the Russian and the Indian side to get the trade agreement done, the process for which will now likely kick off after the new government takes over, said the other person mentioned above.
Spokespersons of India’s commerce ministry and the Russian embassy didn’t respond to emailed queries.
Talks for an FTA between EEU and India come at a time when Russia is facing sanctions from major Western economies following its invasion of Ukraine.
These sanctions have impacted trade and subsequently economy of Russia, while cutting off access to prominent Western-backed financial systems.
The SWIFT ban against Russian banks is one of several international sanctions against the Russian regime imposed by the European Union and other western countries aimed at weakening Russia’s economy.
The sanctions against have also led to an increase in local currency usage for settlement of trade between Russia and its trading partners, including India.
The trade deal between the EEU and India is also likely to improve Indian exports into Russia. At present, trade is skewed in favour of Russia.
During FY24, India’s exports to Russia stood at $4.26 billion, while imports stood at $61.42 billion, up from $3.15 billion exports and $46.21 billion imports in the previous fiscal.
India’s top imports from Russia include crude oil and petroleum products, coal, fertilizers, vegetable oil, pearl, iron & steel and newsprint.
Its top exports to Russia include pharma & drugs, iron & steel, processed minerals, marine products, telecom instruments and electronic machinery.
A recent report by economic think tank Global Trade Research Initiative (GTRI) states that FTAs have emerged as the most important trade promotion tool for India.
“India targets of having an FTA with all major world economies in 2024-25. Beginning 2024, it is in the advanced stages of negotiating FTAs with the UK, Oman, USA, the EU, Switzerland, Norway, Russia, Sri Lanka and Peru,” the report said.
“This means by the end of 2024, India may have completed or nearing completion of an FTA with all major economies except China,” it added.