Yaroslav Tarasyuk, who took office in April 2014, talks to Russia&India Report about the latest developments in Russian-Indian trade.
Last month in Moscow, Russian Prime Minister Dmitry Medvedev held a meeting with Russian trade representatives, at which he set an ambitious goal to increase Russian exports of non-primary goods. Trade Representative of the Russian Federation in India, Yaroslav Tarasyuk, who took office in April this year, told RIR about the latest developments in Russian-Indian trade.
Do the trade sanctions imposed on Russia by the West have any effect on Russian-Indian trade?
India has not imposed any sanctions on Russia and, despite the pressure being put on the country to do so, it is not planning to introduce any. India traditionally pursues an independent foreign policy, proceeding first of all from the interests of its people. A striking example of this is the recent decision to block the WTO Agreement on Trade Facilitation prior to confirmation by this organisation of the legality of food subsidies allocated by India to support its poor population.
Business circles in our countries expect that the coming to power of the new Indian government headed by Narendra Modi will bring a new quality to bilateral economic ties. I think that the pointedly constructive and pragmatic approach of our Indian partners will enable us not only to further expand our cooperation in the fields of the nuclear power generation industry, oil and gas, aircraft and automotive industries, and telecommunications and space, but also to launch new large-scale projects, first and foremost in those industries where India is most powerful, which are information technology and pharmaceuticals.
What projects can increase mutual trade in non-primary goods?
The number of requests from Russian companies concerning cooperation with India is constantly growing. This is partly due to the fact that the implementation of the high-priority project of the Russian Ministry of Economic Development called ‘The Formation of the New Image for Trade Representations of the Russian Federation in Foreign States’ has increased awareness in Russian business circles of the opportunities provided by our trade missions. A lot of requests come in about the promotion of Russian non-primary goods, including medical equipment, control and measuring instruments, optics, machinery and equipment for the oil and gas industry, and chemical products. Mostly, these requests come from small and medium-sized businesses.
Besides this, the products of Russian mechanical engineering enterprises have significant potential in India. Russian companies are participating in tenders for the supply of bulldozers, tractors, pipe-laying machines, and energy generation and railway equipment.
The expansion of Russian-Indian cooperation in the nuclear power industry alone, including the planned construction of the 3rd and 4th power units at the Kudankulam Nuclear Power Plant in the South Indian state of Tamil Nadu, will provide for the supply of products from dozens of Russian enterprises to India.
What factors have a major influence on the development of trade and economic relations between our countries?
Relationships in the strategic partnership imply intense political contact. An important meeting between President Vladimir Putin and Prime Minister Narendra Modi, which has confirmed our course towards increased cooperation, as well as two meetings of the co-chairpersons of the Russian-Indian Intergovernmental Commission (IRIGC) have already taken place this year. In the second half of the year, in India, we are planning to hold a whole series of meetings of the IRIGC working groups and the IRIGC itself, as well as the eighth Russian-Indian Forum on Trade and Investment; exchanges of delegations from the regions of our countries will also take place. The culmination of these events will be the Russian-Indian Summit in December.
There are large reserves in more active development of collaboration at the regional level, as well as in the use of other payment and settlement mechanisms based, inter alia, on the provision of credit lines and financial guarantees by commercial banks, credit institutions and financial foundations in the two countries. A resolution of the problems associated with the transportation of goods would also contribute significantly to an increase in our trade turnover.
India is planning to develop its infrastructure. In what projects could Russia participate?
One of the most important infrastructure projects in India is the construction of transport and industrial corridors to connect the major Indian cities of New Delhi, Kolkata, Chennai and Mumbai. Within these corridors, not only a modern railway infrastructure will be developed, but also hundreds of industrial production facilities and so-called smart cities will be built. The government's plans also include the construction of airports and underground railways in major cities, doubling the size of the gas pipeline network in India, new facilities in the thermal and hydraulic power industries and new nuclear power plants.
Russian companies have consistently been showing a high degree of interest in these projects. Many Russian companies possess extensive experience in the construction of power industry facilities, pipelines, railways and highways, underground railways and communications.
Implementation of such projects in India is carried out both with public funding and with borrowed money, including foreign loans. Japan has been the most active country in the financing of infrastructure projects in India, with one of the conditions for this being the use of Japanese equipment amounting to 30 percent of the amount of the loan granted.
Russian companies which participate in tenders for infrastructure projects in India, as a rule, are part of a consortium with Indian and foreign partners. Very often, the choice of the right partner is crucial to the project. We at the trade mission have seen enough both positive and negative examples. In general, Russian companies need to be prepared for the fact that the Indian market is quite complex to do business in and requires persistence, consistency and sometimes patience to work with partners and customers.
Despite the lofty goals for increasing trade turnover, the results have generally not been very good. Are you preparing any "breakthrough" and in what areas?
I think that it would be more appropriate to say that Russian-Indian trade and economic relations are now focusing, eyeing a new period of growth, just as was the case in 2007–2008. Since this period, mutual trade has been growing at a rate exceeding 30 percent. I wish to remind that since 2007 our trade turnover has more than doubled, reaching a record high level of $10.6 billion in 2012.
This assessment is based on the following factors.
Firstly, Russia, as part of the Customs Union, is beginning negotiations with India on the feasibility of an agreement on comprehensive economic cooperation, part of which could be a free trade agreement.
Secondly, long-term agreements on the supply of goods have become the trend in recent years. Contracts for the supply of rough diamonds and LNG have already been signed. There is constant demand for potash and other fertilizers, metallurgical and thermal coal in the Indian market, and they could be next in line. We can see that Russia and India are progressing with serial construction of nuclear power plants of Russian design, and this is also a guarantee of long-term supply.
Thirdly, Russia and India are planning to implement projects with closer cooperation in the production of hi-tech products, including projects in such sectors as the power industry, mechanical engineering, and production of aircraft and helicopters. And this also means long-term relationships between enterprises.
Finally, the Russian Ministry of Economic Development is working to create an effective mechanism to support Russian exports, both financial and non-financial, in the coming years. By the way, trade missions abroad are an important component of this mechanism. Governmental support for exports, combined with the demand for Russian goods and technology, creates the conditions that promote growth in mutual trade.
As for the immediate prospects, I think that we will see an end to the negative dynamics of Russian exports by the end of this year, and we are forecasting growth at a level of 10% for the following year. Accordingly, our trade turnover figures are being corrected, as dynamics are largely dependent on Russian exports (which account for more than two thirds of bilateral trade).
How is investment cooperation progressing?
At the end of 2013, the volume of Indian direct investment accumulated in Russia’s economy accounted for a total of $3.4 billion. However, most of this is concentrated in the two major oil and gas projects: Sakhalin-1, in which the Indian ONGC Videsh Ltd. owns a 20 percent stake, as well as an oil production project in Tomsk Oblast [Region] with the participation of the Indian company Imperial Energy.
The volume of Russian direct investment accumulated in India by the end of 2013 amounted to a little more than $0.8 billion, which is mostly in the telecommunications industry.
Obviously, the volume of mutual investment can be increased multiple times and diversified by sector. In order to promote bilateral investment cooperation, we have established the Russian-Indian Working Group for High-Priority Investment Projects under the direction of the Deputy Minister of Economic Development and Deputy Minister of Trade and Industry of India. The main objective of the working group is to create favourable conditions to facilitate an increase in investment cooperation between the two countries. The first meeting of the Working Group was held in October 2013 in Moscow, and the second meeting is to be held in India and is planned for October 2014.
Several projects have already been included in the list (for consideration). From the Russian side, this includes projects in the areas of chemical industry, mechanical engineering and civil aviation.
The Trade Representation of the Russian Federation in India
The Trade Representation of Russia in India is focused on the development and expansion of trade and economic relationship between Russia and India. It provides Russian and Indian businessmen with required market information enabling them to establish direct contacts, encourages Russian and Indian enterprises to explore new business opportunities, ensures understanding between the business communities of both countries.
Daily we receive a lot of inquiries from Russian and Indian companies and doing our best to provide them with information about business opportunities and perspective projects in Russia and India, exhibitions and conferences, tenders, potential partners to start a business, etc.
We take all necessary measures to accomplish a task of increasing the two countries’ turnover up to USD 20 billion by 2015, as was agreed by the Governments of Russia and India.
We are confident that Russian-Indian long-term partnership is to grow stronger increasing its weight in global economy while our trade and investment cooperation will show considerable expansion in the years to come.