In a move that could step up Russian investments in India, the two countries are in talks on setting up a joint investment fund for high-tech products, defence equipment and other areas of mutual interest.

“A Russian team, headed by Sun Group’s Shiv Khemka, a member of the Russian Prime Minister’s Foreign Investment Advisory Council, will meet senior officials from the Indian Government to discuss details of the proposed fund on Tuesday,” a Department of Industrial Policy & Promotion (DIPP) official told BusinessLine .

The corpus of the proposed Russia-India investment fund could be around $2 billion, but a final decision is yet to be taken. It will be a 50:50 joint venture between the two countries, the official added.

Interestingly, India’s investment in Russia, at $7 billion, is more than double Russia’s investments of about $3 billion in India. However, with the Ukrainian crisis souring the country’s relations with the US and the EU, the equation could soon change.

“Russia is keen to invest more in India as it is looking for alternate markets to divert its funds from the US and EU following the turmoil in Ukraine,” the official said.

Russia has a similar investment fund with China launched in 2012, which was started with an initial corpus of $2 billion, contributed to equally by both partners. The Russia China Investment Fund, established jointly by the Russian Direct Investment Fund (RDIF) and China Investment Corp to make equity investments in projects, also seeks to raise another $2 billion from Chinese investors.

RDIF has already inked a Memorandum of Understanding (MoU) with Indian financial services company IDFC Ltd to create the framework for joint investments in infrastructure and related industries. Each party will provide up to $500 million to invest in joint projects.

“What Russia is seeking to do now is to create a much larger investment fund that has Government backing from both sides. It is highly interested in the defence sector and other high-tech areas, so it wants the fund to focus on such investments,” the official said.

Hi-tech thrust Senior officials from the DIPP, including Secretary Amitabh Kant and officials from the Ministry of External Affairs, are likely to participate in the meeting on Tuesday. Russia is mainly interested in investing in high-tech products, including those related to the defence sector, while it is also open to setting up supply chains to support the requirement of production and maintenance of sophisticated equipment.

Huge potential There is a huge opportunity for growth in India-Russia bilateral investments, currently at $10 billion, as Russia and China have total investments of $80 billion in each other’s countries. In the case of the US, the figure is much higher, at $109 billion.

India and Russia are also working on a Free Trade Agreement to boost bilateral trade from the existing $6 billion, which is less than 1 per cent of India’s total foreign trade.

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