Impact of PM’s Russia Visit

Russia’s incursion into Ukraine is currently ongoing. While the list of lives lost during the conflict is rising continuously, the danger of rising prices for staple foodstuffs adds to the overall fear. Russia, as well as Ukraine, are among the top exporters of raw materials. However, Ukraine’s exports are being slowed down, and Russia has been declared the most sanctioned state globally. All price rises are likely to contribute to the accelerating inflation rate, which central banks are trying to reduce.

The Russian war will directly impact India and restrict commerce between these two countries.

How Russia-War is affecting the Indian Economy

The first source of friction is the issue of inflation. Prices for commodities have been rising as the verbal war began in February. The impact of crude oil is the most obvious example; however, the war had pushed prices up for gasoline, metals, and edible oils when it was believed that prices would stay constant this year, following an upswing in 2021. Interestingly, in India, the industry was raising prices and slowly passing the increased costs of inputs in December. With this latest price increase and pressures that will increase worldwide. The Indian government had resisted increasing the cost of fuel in November in view of state elections. The price hike was anticipated even before the conflict. The current circumstances only add to the problem.

The other area of concern is the currency, which is the rupee. The war has brought a lot of volatility for currencies around the globe. The combination of sanctions and war has put currencies under attack, including the rupee, which has also been exempted. This has come at a point that the balance of the current account was turning deficit-driven, and, with oil prices rising, the possibility of a higher CAD could be anticipated.

Relations between Russia and India

The relations between India and Russia are the relationship between the Republic of India and the Russian Federation. During the Cold War, India and the Soviet Union (USSR) had a strong military, strategic, diplomatic, and economic connection. Following the dissolution of the Soviet Union, Russia inherited its close relationship with India, and the two countries sustained a special relationship. Russia and India both refer to the relationship as a “special and exclusive strategically-based partnership.”

The Indo-Russian strategic partnership was constructed around five main elements: defence, politics, nuclear energy for civil use, cooperation against terrorism, and space. These five key components were highlighted in a speech delivered by the former Indian Foreign Minister Ranjan Mathai in Russia. However, over the past few years, the economic component has gained importance, and both countries have set an ambitious goal of reaching the level of US$30 billion in bilateral trade in 2025. This is up from around US$9.4 billion in 2017. Both nations are seeking to negotiate a free trade agreement. Bilateral trade between the two countries increased in 2012 by more than 24%.

Military Relations

It is believed that the Soviet Union was an important source of defence equipment for several decades, and this position was handed over to the Russian federal government. Russia, 68 per cent, the USA, 14%, and Israel, 7.2 per cent, are the main arms providers for India (2012-2016). In addition to that, India, along with Russia, has intensified cooperation in the Make in India defence manufacturing collaboration by signing agreements for the building of navy frigates twin-engine KA-226T utilitarian helicopters (joint venture (JV) to build sixty in Russia as well as 140 for India), Brahmos cruise missile. On December 28, 1988, a cooperation between India and Russia agreement was signed. It led to the purchase of a variety of military equipment to India and the establishment of the countries as developmental partners, as opposed to the buyer-seller model, which includes joint ventures to create and manufacture five-generation fighter aircraft: Fifth Generation Fighter Aircraft and the Multirole Transport Aircraft (MTA). The agreement is currently awaiting an extension of 10 years. The year 1997 was the first time Russia and India signed an agreement of ten years for continued technical cooperation in the military. It covered a wide variety of tasks that included the purchase of complete weaponry in joint production and development, mutual promotion of armaments, and technology for military use.

Conclusion

India, as well as Russia’s long-standing Russia- India relationship, has been strained due to geopolitical factors; however, the summit last week with Premier Secretary Narendra Modi and Russian President Vladimir Putin demonstrated the extent of both sides’ plans to maintain their closeness even if it means provoking both the United States and China.

While addressing the Press Conference on April 01,22 in Delhi, Russian Foreign Minister Sergey Lavrov stated that “We will be prepared to provide India with any product it would like to purchase from us. We are willing to talk about it. Russia and India 2021, have excellent relationships,” he said.