Jaishankar calls for urgent steps to address $50-billion India-Russia trade deficit
India's trade deficit with Russia was flagged as a foremost priority during high-level bilateral engagement in Moscow, with the imbalance now exceeding $50 billion
Bilateral trade in goods has expanded roughly fourfold over recent years, but the widening gap between imports (chiefly energy) and exports has kept the trade balance heavily skewed against India
Discussions centred on greater market access for Indian goods, removal of tariff and non-tariff barriers, stronger payment/settlement mechanisms, and deeper business-to-business engagement as the steps needed to correct the imbalance
Assurances were exchanged on continued steady energy and fertilizer supplies from Russia
Both sides reaffirmed the shared target of raising bilateral trade to $100 billion by 2030
Trade Deficit and Balance of Payments — Current Account Implications
A trade deficit occurs when the value of a country's merchandise imports from a partner exceeds its exports to that partner. It forms the goods component of the current account within a country's Balance of Payments (BoP), alongside services trade, primary income, and secondary income (transfers).
Key Details
- India's trade deficit with Russia has widened sharply as crude oil imports surged following the redirection of discounted Russian crude to India after 2022, while Indian exports (pharmaceuticals, engineering goods, agri-products) have not scaled proportionately
- A persistent bilateral deficit with one major partner does not necessarily worsen India's overall Current Account Deficit (CAD) if surpluses with other partners (such as the US) offset it — a distinction tested in Mains answers on India's external sector
- The Reserve Bank of India tracks such bilateral imbalances as part of its BoP compilation, released quarterly
The $50-billion figure quantifies a bilateral goods trade deficit specifically with Russia, driven overwhelmingly by energy imports, and is being addressed through market-access and non-tariff-barrier negotiations rather than currency measures alone.
Rupee Trade Settlement Mechanism — Special Rupee Vostro Accounts
To reduce dependence on hard currency for trade with sanctioned or currency-constrained partners, the Reserve Bank of India in July 2022 introduced a framework allowing international trade settlement in Indian Rupees through Special Rupee Vostro Accounts (SRVA).
Key Details
- Under the mechanism, an Indian Authorised Dealer bank opens a Special Rupee Vostro Account for a correspondent bank of the partner country; Indian exporters are paid in rupees from this account, and Indian importers pay into it
- Russian banks, including Sberbank and VTB Bank, were among the first to receive RBI approval to open such vostro accounts for India-Russia trade settlement
- The mechanism was developed partly in response to Western sanctions on Russia limiting the use of the SWIFT payment system for major Russian banks
- A persistent challenge has been the accumulation of rupee balances in these accounts because Russia's exports to India (paid for in accumulating rupees) far exceed its imports from India, complicating the usability of those funds
The call for "stronger payment mechanisms" refers to resolving frictions in this rupee-settlement architecture — the very trade imbalance being discussed is also what causes surplus, hard-to-utilise rupee balances to build up on the Russian side, making the payment-mechanism and trade-deficit issues two sides of the same problem.
India-Russia Special and Privileged Strategic Partnership
India and Russia elevated their bilateral relationship to a "Special and Privileged Strategic Partnership" during a Russian presidential visit to India in December 2010, the highest tier of partnership India accords to any country, encompassing defence, energy, space, and economic cooperation.
Key Details
- Annual India-Russia summits are the apex mechanism for reviewing the partnership; both sides have set a shared target of $100 billion in bilateral trade by 2030, alongside an earlier bilateral investment target of $50 billion by 2025
- Efforts to conclude a free trade agreement between India and the Eurasian Economic Union (EAEU) — comprising Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia — are ongoing as one route to formalise tariff reductions and address non-tariff barriers
- Russia remains a major source of defence platforms and crude oil for India, while India's exports to Russia are comparatively modest, concentrated in pharmaceuticals, chemicals, and engineering goods
The market-access and non-tariff-barrier concerns raised are being pursued partly through the prospective India-EAEU FTA, situating this bilateral trade issue within the wider institutional architecture of the Special and Privileged Strategic Partnership.
- India-Russia bilateral trade deficit: over $50 billion
- Approximate current bilateral trade volume: nearing $60-68 billion annually (up roughly fourfold from about $13 billion in 2021-22)
- Shared bilateral trade target: $100 billion by 2030
- Earlier bilateral investment target: $50 billion by 2025
- Rupee trade settlement framework: introduced by RBI, July 2022, via Special Rupee Vostro Accounts
- Strategic partnership tier: "Special and Privileged Strategic Partnership," established December 2010
- Prospective trade agreement under discussion: India-Eurasian Economic Union (EAEU) FTA