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India and Russia are going to explore the potential of trade and investments between India and the Eurasian Economic Union (EAEU) during the upcoming visit of Prime Minister Narendra Modi to St Petersburg, Russia where he is expected to meet Vladimir Putin. Modi will also address the St Petersburg International Economic Forum (SPIEF) often called a “Russian Davos”.
The EAEU, comprising Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia established in 2015 and seen by experts as Russia’s attempt to strengthen its position in the region at the backdrop of its tensions with the West, could emerge as a prospective partner for India which so far had limited trade with CIS countries, say experts.
On June 3, on the sidelines of SPIEF, Nirmala Sitharaman, Minister of State for Commerce and Industry, and Veronika Nikishina, Board Member and Minister for Trade of the Eurasian Economic Commission (EEC), are expected to sign an MOU to begin talks on a free trade agreement (FTA) between India and EAEU.
Two years ago at the same Forum, Sitharaman had signed an agreement for establishing a Joint Feasibility Study Group on India-EAEU FTA. As both sides have accepted the report prepared by the group, the formal negotiations would begin after the new MOU is signed, the official at EEC said.
Trade potentialCurrently, bilateral trade between India and EAEU is around $9 billion, and it was at $11 billion at its peak in 2012-2014. “Supported by the modern instruments of trade policy, the trade could grow significantly,” Nikishina told BusinessLine in the e-mailed response.
Belarus, according to her, will benefit the most with the potential of trade growth with India up by 20 per cent, followed by Russia (18 per cent) and Kazakhstan (12 per cent). For EAEU as well as for India, the potential export growth is the estimated at around 18 per cent once the FTA is in place.
The Joint Feasibility Study Group report published earlier this year showed a potential growth of bilateral trade between India and EAEU up to $37-62 billion.
The exports from the EAEU to India have the potential of additional growth up to $23-38 billion while in case of exports from India to the EAEU, there is potential additional growth of $14-24 billion.
So far EAEU has only one FTA agreement — with Vietnam.
According to Eurasian Economic Commission, in 2016 the mutual trade of the union with Vietnam increased just 1.5 per cent, however, in the first quarter of 2017 calendar year the bilateral trade volumes jumped 29.3 per cent.
“Obviously the main driver of this growth was the FTA that entered into force and has a provision for annual gradual decrease of tariffs from both parties mutually,” Nikishina said. She added that EAEU is currently in the various stages of FTA talks with Israel, Egypt, Singapore and Iran.
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