Russian companies have felt echoes of the "Make in India" concept with the economics minister saying that the Rusian government was in the process of "modernising the intergovernmental agreement to encourage and mutually protect investments."
Russia & India Report (RIR) talked with Alexey Ulyukaev, Russia's Minister for Economic Development, about this and other developments in Russian-Indian business relations, including an upgrade of the bilateral investment protection agreement.
Excerpts from the interview:
RIR: How successfully has trade developed between Russia and India in 2014 and in the first months of 2015? Has the volume of goods increased? What factors influence bilateral trade?
Ulyukaev: The trade turnover between our countries over the last few years has been at a level of $10 billion. Last year it was $9.5 billion. Exports from Russia to India were estimated to be $6.3 billion, and imports from India were $3.2 billion. In the first four months of 2015, bilateral trade was $2.5 billion, which is a reduction by 17.1 percent from the same period last year.
Negative factors influencing Russian-Indian trade are the consequences of the volatile exchange rates for the rouble in relation to the US dollar, irregularity of Russian supplies on the Russian trade line, and also a reduction in demand on the Russian internal market.
However, recent agreements on Russia's large-scale involvement in developing Indian nuclear energy, cooperation in the oil and gas sector and in the area of jewellery manufacturing, long-term contracts for the supply of oil, liquefied gas and fertiliser from Russia may play a positive role in increasing Russian-Indian trade.
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RIR: Have you noticed a change in the atmosphere in Russian-Indian trade after the West placed its sanctions against Russia? Has it become harder for Russia to negotiate with Indian partners? If so, what is it connected with?
Ulyukaev: The traditional atmosphere of trust in our relations, including business relations, hasn't changed. Additionally, our Indian colleagues are hoping to further stimulate cooperation between our countries in the backdrop of the unfolding situation. They are prepared to support Russia as a long-term friend and partner.
Indian businessmen actively try to find points in common, industries and trading positions, by which they can provide maximum satisfaction for the demands of our country in trading goods. That said, India has a pragmatic approach to resolving issues on extending cooperation, first and foremost, on a mutually advantageous basis. The sanctions have stimulated Russian-Indian cooperation in terms of supplies of food products, spurring interest primarily in Indian manufacturers of milk, meat, vegetables and fruit, as well as unprocessed food.
At the same time, India also receives its advantages. Thanks to demand in the Russian market, Indian companies are ready to expand the range of products and improve their quality. Indian companies providing technology or advanced equipment (for example in oil and gas) are in demand in the Russian market, because these goods were previously imported, for example, from European countries. They are also ready to start their deliveries to Russia and to discuss the possibility of organizing production in our country.
RIR: In what areas do you see potential for expanding trade and cooperation for Russia and India? What steps can be taken by Russia to strengthen this potential?
Ulyukaev: Russian vehicles, equipment, transportation, chemical products and fertiliser, oil and gas, semi-precious and precious metals, coke and thermal coal, rough diamonds, bean and sunflower oil etc. enjoy high demand in the Indian market.
In separate trading positions, long- term contracts have already been signed for rough diamonds, crude oil and LNG. Such long-term agreements would be part of the supply for thermal coal, fertiliser, machinery and electronic and agricultural products.
In the near future India will remain a promising market for Russian mining equipment. There is demand in this country for long down-hole mechanical treatment facilities, large draglines, shovels, bulldozers, dump trucks and drilling rigs, energy and railway equipment. There is stable demand for Russian steel of special grades for the production of automobiles.
Civil aviation is a promising sector in India, with demand for regional and medium haul airplanes and also civil helicopters. There is a possibility for supplying 100 Sukhoi Superjet passenger planes to the Indian market and, in the future, the MC-21, and also civilian modifications of helicopters (Mi-172, Ka-226 etc.).
There is also the possibility of supplying medical products to India for healthcare facilities, mobile medical units for a rapid assessment of the epidemiological situation and the health status of the population in remote areas.
Stimulating work for the launch of the international North-South transport corridor is also of no little importance, as it will significantly reduce time for transporting goods.
Furthermore, RusNano is considering the establishment of a Russian-Indian joint fund to support joint projects in the field of high technology and technology transfer. In general, since last year the working group for strategic projects has began to choose promising projects for collaboration.
For further growth of bilateral trade, the potential of concluding an agreement on comprehensive economic cooperation between the Eurasian Economic Union and India is being developed, which will be part of a free trade agreement in goods and services.
RIR: Is it possible to extend manufacturing cooperation between Russia and India? In what spheres? In whose territory? In what timeframes?
Ulyukaev: Areas for cooperation can be both Russian and Indian. Everything depends on the products, the geography of consumption and the availability of resources and raw materials. Both countries promote establishing manufacturing in their territories, creating favourable conditions for business, free economic zones, technology parks and industrial zones.
The extension of industrial cooperation between Russia and India is possible in industries such as the production of power equipment, railway equipment, machine tools, aircraft and helicopter, tractor, equipment for the metallurgical industry, and the oil, gas and chemical industries.
RIR: Can we expect in the coming years the expansion of localised production of Russian goods in India? Are there any projects or agreements in this area? What, do you believe, restrains Russian investments in India?
Ulyukaev: In India, there is currently an assembly plant for KAMAZ automobiles. Lighting Technology has opened up in Jigani the production of lighting equipment.
On the industrial site of Reliance Industries in Jamnagar, Sibur is building a plant to produce 100,000 tonnes of butyl-rubber a year.
In general, India is now actively promoting a policy to localise production of imported goods at home and encourages the business community to follow the concept of "Make in India", by creating favourable conditions for production localisation. Echoes of this initiative by the Indian government are felt by Russian companies. Most negotiations on the supply of new industrial products ends with the Indian side proposing to create a joint venture or technology transfer to them.
The Indian government aims to improve the business investment climate in the country within the shortest possible time as, at present, according to the World Bank Doing Business Report 2015, this country occupies only the 142nd position. To create favourable conditions for mutual investment, increase safety guarantees and introduce a clear mechanism for dispute resolution, we are modernising the intergovernmental agreement to encourage and mutually protect investments.
(By arrangement with Moscow-based Russia & India Report)