01.01.2021 Author: Dmitry Bokarev

The Future of Economic Cooperation between Russia and India as Pandemic Continues to Abate

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It is a well known fact that the COVID-19 pandemic, which began at the end of 2019, has resulted in a global economic downturn and a fall in trade between nations, including the Russian Federation and India. The two countries have been partners for a long time. Economic ties, in strategic spheres such as defense, nuclear energy and space, have brought these two nations closer to one other. In 2019, before the pandemic swept across the globe, the value of trade between India and Russia had continued to grow steadily and increased by 2.3% in comparison to that in 2018. In addition, India earned the 14th spot among top nations for Russian exports.

Nonetheless, from January to September 2020, trade between Russia and India was worth $6.35 billion, which was 16% lower than its value during the same period in 2019.

According to available data, the main reason for the change was the reduction in steel manufactured in India due to the temporary closing of numerous plants and the fall in transported freight on account of the spread of the novel Coronavirus. Naturally, the decrease in steel production led to India’s lower demand for coal, which is essential for the nation’s steelmaking sector. Incidentally, in 2019, hydrocarbons, which include coal, crude oil, and other fossil fuels, accounted for more than 31% of all of Russia’s exports to India, and the former earned over $2 billion as a result.

Obviously, the tourism industry was one of the most negatively affected sectors of the economy due to the COVID-19-related restrictions.

Still, sooner or later the pandemic will end and there is no good reason why the cooperation between India and Russia should not continue to strengthen. The Russian Federation is still keen on trading with the second most populated country on Earth, while India certainly needs fuel and high tech for its already sizable but still rapidly growing manufacturing sector, and the relations between the two countries remain friendly.

An important aspect of cooperation between Russia and India is the former’s willingness to support the latter’s Make in India initiative. Its aim is to localize a substantial portion of the manufacturing of almost all high tech products India currently purchases from other countries in its own territory, which should, in turn, create work places for the nation’s inhabitants and help them learn about new technologies in the process. The Russian leadership is on board with this initiative since the two countries have been building a relationship based on trust starting in the Soviet times. During the last decade, the Russian Federation and India established a joint plant for the manufacture of Russia’s Kamaz trucks (Kamaz Motors Ltd. operating in India’s industrial city of Hosur); collaborated on the installation of two units at the Kudankulam Nuclear Power Plant, and in March 2019, launched Indo-Russia Rifles Private Limited (IRRPL), a joint weapons-production facility, which makes the AK-203 variant of the Kalashnikov family. In September 2019, during Prime Minister Narendra Modi’s visit to the Russian Federation, the two countries agreed “to encourage joint manufacturing in India of spare parts, components, aggregates and other products for maintenance of Russian origin” armaments, used extensively by India’s armed forces.

Joint initiatives in the defense and military technology sectors are an important aspect of cooperation between Russia and India. In fact, the two countries have achieved impressive levels of collaboration in these areas, which span several decades. As mentioned earlier on, India’s armed forces are, in large part, equipped with Soviet and Russian origin armaments and Russia’s legendary Kalashnikov rifles are now manufactured in India. In 2018, India signed a deal with the Russian Federation on the purchase of the latter’s S-400 air defense systems despite the threat the agreement posed to the former’s relationship with the United States. And in spite of pressure from Washington, it is being implemented as planned. The last S-400 delivery to India is expected in 2025.

It is worth noting that, at present, issues related to defense are important to India for a couple of reasons. Firstly, the US decided to withdraw its forces from Afghanistan, which may lead to a rise in terrorism in the South Asian region, and secondly, there have been increased tensions between the PRC and India. It is common knowledge that the two Asian giants are long-standing rivals. In addition, their bilateral ties have been plagued by a number of territorial disputes, which, on more than one occasion, have resulted in bloodshed (e.g. in 1962, 1967, 1987 and 2020).

From May to June 2020, several dozen Indian and Chinese servicemen died as a result of clashes in the disputed Aksai Chin region. The two sides managed to end the standoff but the situation remains volatile. In December of 2020, there have been a number of reports by Indian media saying that the PRC has been building numerous military facilities near the Line of Actual Control (LAC) with India. In addition, on September 10, 2020, India’s The Economic Times wrote that China had amassed surface-to-air missiles in the disputed region. Plus, PRC’s drones were spotted near LAC. In October, The Tribune (an Indian newspaper) wrote that China had 60,000 troops on India’s northern border.

It has also been reported that India “accelerated the purchase of weapons” after border clashes between Indian and Chinese troops in case of more conflicts involving the PRC and India’s long-standing rival, Pakistan. In fact, India has a substantial military budget, for instance in 2018, it spent $67 billion on such needs. Apparently, the country plans to buy armaments from domestic and foreign suppliers. Since India’s armed forces are accustomed to using Russian origin weapons and military equipment, it is possible that the country will purchase a substantial portion of what it needs from the Russian Federation. Naturally, no one should rejoice at the prospect of earning money from selling weaponry. Still, in order to preserve peace, it is important to be prepared for war. And Russia, India’s long-standing and reliable partner, will be happy to contribute to improving the latter’s defense capabilities once again.

It is clear that India and the Russian Federation need each other’s support, hence, prospects of economic cooperation in strategically important spheres still look great. One can therefore expect that once the Coronavirus pandemic has been successfully dealt with and there is no longer a need for quarantines and restrictions, the collaboration between the two countries will continue to foster.

Dmitry Bokarev, a political observer, exclusively for the online magazine “New Eastern Outlook”.

 


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