Beyond Oil Navigating the New Realities of India-Russia Trade

Today’s news update, In Moscow this week, External Affairs Minister S. Jaishankar highlighted both the opportunities and challenges of building India-Russia trade. At a forum with Russian leaders and businessmen, the minister acknowledged India’s growing trade deficit with Russia. The minister called on both the government and industry to work together to find a balance, citing rising crude oil imports as a major reason for the deficit. At the same time, Jaishankar urged Russian companies to engage “closely” with India, especially amid the global tariffs and trade policy changes proposed by former US President Donald Trump.

The India-Russia trade relationship is not new. The two countries have enjoyed strong ties in energy, defence and diplomacy for decades. However, the growing trade imbalance between India and Russia is now a critical issue. Jaishankar stressed that urgent corrective steps are needed to address this gap to ensure the long-term sustainability of the economic relationship.

Why India’s trade deficit is widening due to oil

India has increased its purchases of Russian crude oil on a concessional basis since 2022, which has helped meet domestic energy demand at competitive prices. A significant portion of India-Russia trade is now skewed towards imports. In the 2024-25 fiscal year alone, nearly 70% of India’s purchases from Russia were oil and petroleum-related products. While profitable in the short term, this heavy dependence widens the trade deficit and raises concerns about long-term economic balance.

Jaishankar’s remarks in Moscow made it clear – India cannot just be an oil buyer, it also needs to be a significant and competitive exporter to Russia.

Finding balance beyond oil in India-Russia trade

To address this imbalance, India is actively exploring ways to diversify its export portfolio to Russia. Key industries with significant growth potential are – Pharmaceuticals, Indian pharmaceuticals, already a global player, can meet Russia’s growing healthcare needs. Information Technology and Services – This sector can contribute to the modernization of Russian industry due to India’s established expertise in IT solutions and digital infrastructure. Textiles and Consumer Goods – India’s expanding consumer goods exports can capture the Russian middle class market.

Agriculture and Processed Food – Indian agricultural products, spices and processed foods are in strong demand in Russia. Jaishankar stressed that developing these non-oil trade flows is crucial to making India-Russia trade two-way.

Tariff Challenge

Tariffs are another hurdle that the minister mentioned. As global trade becomes increasingly fragmented, tariffs and protectionist policies – as often driven by Trump-era trade tactics – pose new challenges. It could be difficult for emerging economies like India to gain market access if such policies are rolled back. Amid Western sanctions, Russia is looking for new markets for its products.

India, with its large consumer base and growing economy, offers a natural fit. But for the partnership to be successful, Russian companies need to engage more actively with Indian opportunities – from manufacturing partnerships to investments in infrastructure and technology.

Benefits of investment and industrial partnerships

It is not just trade, investment is equally important. Jaishankar urged Russian businesses to invest in India’s manufacturing ecosystem and technology-driven industries. Russian companies, traditionally focused on energy and heavy industry, are now being encouraged to collaborate with India’s Make in India and Digital India initiatives. These initiatives can ensure that trade between India and Russia is based not only on goods but also on high-value, future-oriented industries.

The way forward by harnessing the potential

For India and Russia, the path forward is one of reconstruction rather than reinvention. The principles of partnership remain strong, but, as Jaishankar noted, both countries need to fully exploit the potential of trade and investment. Reduce tariff barriers to make exports profitable and sustainable. Promote cross-border investment in manufacturing, defence and technology. Use alternative payment systems to reduce the challenges posed by ongoing sanctions and dollar-dependence.

There is potential to transform trade between India and Russia into a truly balanced economic partnership, benefiting both businesses and consumers as well as government revenues.

THE End

Jaishankar’s Moscow visit marks a significant turning point in the development of between India and Russia trade. The minister’s message is clear: while oil is an effective bridge, the future must focus on diversification, investment, and deeper two-way trade. India and Russia have a unique opportunity to strengthen their economic ties, reduce the risk of dependency, and establish a strategic partnership that can address global uncertainties at a time when the global trade landscape is changing.