The Hindu Business Line : Russian challenge

The recent meeting in Moscow of the India-Russia Joint Study Group — which recommended a bilateral trade target of $10 billion by 2010 (it was $2.7 billion in 2005-06) — is one more attempt at goal-setting without considering whether the enabling improvements will be feasible within the set time. Even so, New Delhi and Moscow cannot be faulted for indulging in ‘castle-building’ because even unrealistic targets can induce a level of activism hitherto thought impossible.

Indeed, the Study Group should be complimented for stating clearly that the 2010 target cannot be reached just via the bilateral goods trade route, but demands a ‘Comprehensive Agreement on Trade and Economic Cooperation’. Given the limitations of the goods trade, there would seem no other way for India-Russia ties to blossom. Also, the trade profile is still of some vintage, with more than 50 per cent of Indian exports comprising four product categories — drugs, pharmaceuticals and fine chemicals (33 per cent), coffee, tea, and ‘unmanufactured’ tobacco. Some 60 per cent of Russian exports is also dominated by an equal number of products — iron and steel (26 per cent), fertilisers, non-ferrous metals, and coal, coke and briquettes. There is thus barely any scope for expansion in these sectors.

With the economic profile of the two nations changing, trade in services could be a catalyst for a quantum jump in bilateral trade, especially because this sector contributes handsomely to the GDP of both the countries (more than 50 per cent). But here also there are problems, not the least of which is that both Indian and Russian information technology-enabled services (offshoring, for example) are competing for markets worldwide. The two areas where some headway can perhaps be made is the oil sector and Defence supplies. But with the former marked by heavy competition from international oil-exploration majors and the latter burdened by a long history coloured by the Cold War imperatives, over-reliance on these two sectors for attaining the 2010 target would be unwise.

There is little doubt, therefore, that the $10-billion target for 2010 is ambitious. But this should not prevent the two nations from improving the trade environment that would enable businessmen exploit as efficiently as possible the opportunities to make money. As the Study Group conceded, there are “considerable barriers to bilateral trade and investment” which should be ‘resolved’ if bilateral trade is to increase substantially. After all, the majority of Russian businessmen are even now unaware that “India is endowed with advantages for business activity,” not to speak of the huge wall that Moscow has erected with its unhelpful visa policy for intending Indian business travellers.

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