Mint | 8 March 2022
Ukraine conflict may delay India-Eurasia trade talks
by Ravi Dutta Mishra, Dilasha Seth
The war in Ukraine may delay negotiations for a free trade agreement between India and the Eurasian Economic Union (EAEU), said Indian government officials and analysts aware of the development.
Russia is the largest country in the bloc.
India and the five-nation EAEU — comprising Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan — were to launch trade talks at the beginning of the year. The potential trade deal was expected to double India’s trade with Eurasian countries who have a combined gross domestic product (GDP) of $5 trillion.
Now, the negotiations are only expected to start once tensions ease, said a senior government official requesting anonymity.
According to analysts, an agreement with the EAEU will have strategic significance for India, given Russia’s worsening ties with the West following its invasion of Ukraine.
Russia is India’s biggest trading partner among Eurasian countries, importing Indian goods worth $2.65 billion in 2020-21, followed by Kazakhstan ($225 mn), Armenia ($69 mn), Belarus ($62 mn) and Kyrgyzstan ($38.7 mn).
Queries mailed to the Russian Embassy in New Delhi on Friday and India’s commerce ministry on Sunday remained unanswered at the time of publication.
The manufacturing sector, including pharmaceuticals and chemiclas, makes up the bulk of India-EAEU trade, followed by food products, according to an industry study.
As per a survey report by the Federation of Indian Chambers of Commerce and Industry (Ficci), financial issues, logistics and connectivity are the main impediments to more trade and investment between the two regions.
Experts said a deal would offer greater access to India’s pharmaceuticals, engineering goods, textiles and processed food products into the Eurasian as well as Central Asian markets.
“We could see India-EAEU trade talks restart with vigour largely owing to the trade and financial restrictions imposed by the West on Russia. Russia and India could aim for a rupee-rouble payment system to boost trade," said Pradeep S. Mehta, secretary-general of non-profit CUTS International, referring to the various financial sanctions imposed by the West on Russia.
“Since the mid-90s, we have been talking of potential market access in central Asia. But it never got realized. Trade agreements are a statement of political intent. When the government starts looking at possibilities of widening the trade relations, businesses get a signal that there is strong political intent and they also want to invest," said Biswajit Dhar, a professor at JNU.
Last year, the western wing of the International North-South Transport Corridor (INSTC), which offers a shorter multimodal transportation route between Europe and India compared with the Suez Canal, became operational.
Routing consignments through Russia, Azerbaijan and Iran to Mumbai now takes about 22 days compared with 40 days via the Suez Canal and western European ports.
Experts further pointed out that the proposed free trade agreement can significantly benefit India’s pharmaceutical sector, which currently faces delays in the supply of products due to the time taken for implementation, registration and confirmation by Russian authorities.Textiles is another large area of interest for India, as has been indicated in trade talks with several other countries.