Welcoming the decision to increase bilateral trade between India and Russia to USD 25 Billion by 2025, Mr Ganesh Kumar Gupta, President, FIEO said that such target is achievable, as this only requires a Compound Annual Growth Rate (CAGR) of 12.9%, provided some of the key challenges are addressed.
Elaborating on his point Mr Gupta maintained that payment mechanism is crucial to trade which further aggravated with US sanction on Russia resulting in banks eagerness to give up the Russian business rather than invest time and resources in understanding the sanctions. Mr Gupta pushed for trade in local currencies between India and Russia with a third country currency as a reference point so that market driven exchange rate play a pivotal role in trade transactions. This should be accompanied by extending all benefits of exports to such trade in local currency at par with trade transacted in free foreign exchange.
“India should conclude early FTA with Eurasian Economic Union (EEU) which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia so that the tariff preference provide our exporters the level playing field with China, which signed similar FTA in May 2018 with EEU, for greater penetration in Russia and CIS market,” Mr Gupta added.
Mr Gupta also underscored that use of International North–South Transport Corridor (INSTC) should be encouraged as it reduces voyage time and freight for exporting/ importing goods to/from Afghanistan, Russia and Central Asia. “The trial runs on the route has been successful. Indian exporters and importers should use this route as significant volumes will further reduce the freight and add to better services,” he highlighted. Mr Gupta urged that RBI should clarify the position in respect of consignment transited through Bandar Abbas (Iran) though destined for Russia & Central Asian economies as many banks are not negotiating such documents since goods are moving through Iran.
According to FIEO analysis, one of the reasons for lackluster growth of exports to Russia is due to non-mapping of Indian Exports with major Russian imports. “We need to diversify our exports to meet the imports requirement,” opined the FIEO President. Currently, India is having over 1% share in Russian imports, only in 2 out of top 10 imports.
In Mr Gupta’s opinion, both countries need to work together on NTBs and NTMs including phyto-sanitary standards, alignments in Customs rules and regulation, mutual recognition of certification, etc.