Hindu Business Line | 21 October 2014
India, Russia to re-start study on free trade agreement feasibility
Bilateral trade could go up to $15 billion by 2015 as exporters tap opportunities
India and Russia are ready to start discussions on a long-pending free trade agreement that could increase bilateral trade and investment flow, and help reduce dependence of both countries on the US and the EU.
The Commerce Ministry has sent a proposal to the Cabinet Committee on Economic Affairs (CCEA) for setting up a joint study group to examine the feasibility of a Comprehensive Economic Cooperation Agreement (CECA) with the Customs Union of Russia, Kazakhstan and Belarus. CECA is a comprehensive FTA that involves dismantling of tariff and non-tariff barriers for trade in goods and services and freer flow of investments.
“The Joint Study Group, with officials from both sides, will examine the scope of the pact and the areas it could cover,” a Commerce Ministry official told BusinessLine.
Russia has strained relations with the EU and the US over its posture on Ukraine while India wants to diversify its market beyond the two regions by focussing on Latin America, Russia and the CIS and Africa.
“It will serve both sides if we are able to successfully implement an FTA. There is huge scope as the present volume of trade and investment is very low,” the official said.
At present India’s trade with Russia is just $6 billion, which is less than 1 per cent of the country’s total foreign trade.
According to exporters’ body FIEO, bilateral trade could more than double to $15 billion by 2015, due to efforts being made by exporters to tap opportunities in the region.
Once an FTA is in place, trade would increase manifold. Agriculture products, textiles, pharmaceuticals and chemicals are some of the areas where India could have immediate gains.
Although both India and Russia were interested in starting talks on CECA for the past few years, there were some hurdles that had to be cleared.
As Russia necessarily has to include its customs union partners Belarus and Kazakhstan in its regional pacts, it was necessary to get Kazakhstan’s approval too, which was initially reluctant to give it.
Russia had also put in place a condition that a prior roadmap of priority investment projects should be drawn before CECA talks can start. But it was withdrawn when India objected.
Russia is interested to do more business in areas such as tractors, industrial machinery and civil aviation, while India wants to attract investments in the Delhi-Mumbai Industrial Corridors, the New Manufacturing and Investment Zones and export more pharmaceuticals and agriculture products.