India’s expectations of a jump in goods exports to Russia, to partly balance a steep rise in its oil imports from the country following Western sanctions last year, are unlikely to be realised any time soon going by the trend so far.
Manufacturers, especially of network products, such as computers, electronics and telecom equipments with global value chains, are hesitant to export, fearing third-party sanctions on them while Moscow itself is not interested in buying non-sanctioned products such as food and pharmaceuticals as they have quality issues, sources tracking the matter have said.
While India’s imports of goods from Russia, dominated by crude oil, were valued at $11 billion in April-May 2023 posting a 206 per cent increase (year-on-year), its exports to the country were barely $600 million, although they were higher by 161 per cent due to a very low base, according to Commerce Department data.
“Following the imposition of the West’s economic sanctions on Russia due to its attack on Ukraine last year and subsequent increase in India’s purchase of discounted oil from the country, both nations understood the need for Russia to buy more from India for the success of the rupee payment mechanism designed to circumvent Western sanctions. Russia even handed over lists of items to India where its industry had shown interest in sourcing from the country. But it did not lead to much and the latest trade figures reinforce that,” an official told businessline.
The fear of third country sanctions by Western countries amongst Indian exporters of network products, that are part of a global value chain, such as computers, electronics and telecom equipments, have been stopping them from exporting to Russia, the official explained. “Most of the demand from Russia for imports from India is for items such as electronics and machinery. Many exporters of such items in India are dealing with advanced economies (who have imposed sanctions on Russia). They may be exporting to them or may have taken technology transfer. They are not willing to export to Russia as they fear possible sanctions,” said Ajay Sahai, Director General, FIEO.
Not in demand
Other essentials that are not under sanctions, such as food and pharmaceuticals, are not in demand from Russia as they have issues with the quality of items produced in India, another official pointed out. “The Russians are used to buying Western products. They have quality issues with many of our items. That is why they do not place orders,” he said.
As Indian exporters fear to sell what Russians want to buy and Russia doesn’t want to buy what India is ready to sell, the numbers are not going up.
In 2022-23, India’s imports from Russia increased 368 per cent (year-on-year) to $46.2 billion. Its exports in the same year were at $3.14 billion, down 3.3 per cent. Trade deficit was at $43 billion in 2022-23.
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