India Briefing | 8 January 2021
India-EAEU FTA appears in sight, Moscow signals support
by Chris Devonshire-Ellis
A Free Trade Agreement (FTA) between India and the Eurasian Economic Union (EAEU) appears to be on the cards this year, according to statements made by several Kremlin sources. Such a deal would be a major boost for India and Russia – the EAEU includes Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. It has a combined population of 167 million and a GDP of about US$5 trillion.
In 2019, trade turnover between EAEU member states and India amounted to US$13.8 billion, and in the first nine months of 2020, reached US$9 billion. Russia is India’s biggest trade partner among EAEU nations.
Bala Venkatesh Varma, the Indian Ambassador to Russia, said that the creation of a free trade zone between India and EAEU would boost trade turnover to US$15 billion – about a 25 percent immediate increase. India and Russia have previously discussed ways of doubling trade to US$30 billion by 2025.
Russian President Vladimir Putin is scheduled to visit India sometime in the first half of this year, according to Nikolay Kudashev, Russia’s ambassador to India, in a further sign that positive trade news could be forthcoming.
An India-EAEU FTA is increasingly possible as India recently pulled out of the RCEP FTA with China, Australia, New Zealand, Japan, South Korea, and the ASEAN nations – mainly due to domestic market protectionist issues with Indian corporates concerned about Chinese competition in the Indian market. An EAEU deal offers new access to foreign markets but is far less likely to see corporate Indian companies lose domestic market share.
Russia and India are also to be linked via the International North-South Transport Corridor (INSTC), which connects Mumbai by ship to the Iranian Port of Chabahar and then by rail onto to Anzali Port in the Caspian Sea and by ship to markets in Azerbaijan, Kazakhstan, Russia, and Turkmenistan. The INSTC also has a spur north and west to Afghanistan.
Consequently, an EAEU FTA for India makes a lot of strategic sense. There are opportunities for Indian companies to sell generic medicines, tea, canned vegetables, grapes and raisins, rice, coffee and coffee extracts, and related consumables, such as spices, herbs, and essences, while we discussed what Russian companies could sell to India in the article What Can Russian Companies Sell to India?