At a time when India needs to strike a strong political balance between its relation with the US and Russia, furthering economic relations with the former Soviet Union is proving to be increasingly difficult.
Several high-risk factors, including problems like visa issues, banking, connectivity and language barriers, are keeping the Indian industry away from Russia and lately, there has been a lot of concern about the sagging Indo-Russian trade and economic relations. According to officials, the indifferent attitude of Russian authorities towards Indian investors has not been helping the cause.
President Prathiba Patil?s visit to Russia, scheduled for September, may not yield much dividend for India either. The visit will be followed by Prime Minister Manmohan Singh?s visit for the annual summit in December.
Experts have pointed out that, despite occasional hiccups, Indo-Soviet relations and geo-strategy combined to make them rock solid. ?Ludhiana?s prosperity is in considerable measure, built on the captive wool exports to Russia,? they said. Rajiv Dogra, a former diplomat, said, ?The political and business leadership, on both sides, has not made any effort in removing doubts that cloud the bilateral sphere. This is a pity because the fundamentals haven?t changed. We still need each other. Moreover, there is a lot that we can do together in business and industry. But Russia needs to get over its infatuation of the West first, and India needs to pursue it a bit more ardently. More importantly, bureaucrats have to device ways of removing, rather than adding, bottlenecks,? Dogra suggested.
According to MEA officials, Russia is narrow-minded on the issue of visas, especially since Europeans have imposed certain conditions on them, wherein they had to sign agreements to take back anybody who travels from Russia to Europe on an illegal visa. While this defies logic, Russia is now using the same policy with India and this in turn is proving to be a burden for Indian businessmen.
Transition from the Soviet Union to Russia has come after the loss of a large part of its territory and population. Switching from the state-controlled economy to a market economy has generated many problems for Russia. The level of corruption is quite high and adds to the already evident lack of expertise to deal with the pressure of a market economy and competition. Though they have enormous resources, not enough was done to invest in high-technology areas when the country was passing through an economic crisis.
While bilateral trade between India and Russia is likely to touch $10 billion by 2010, almost double the current figure, the annual trade turnover between India and Russia stands at just above $5 billion, far below the economic potential of both the countries. Russia and India have set up a joint study group (JSG) to finalise a road map for increasing bilateral trade turnover to $10 billion by 2010.
?There are huge opportunities in the field of technology development, especially in the IT sector, power, aviation, developing machinery, transport and pharmaceutical industry, both in India and Russia,? officials said. Though Russian companies like Magnitogorsk, aluminium giant Rusal, Cheboksar and Transaero have shown interest in starting operations in eastern India, however, not much has happened so far. Also, while the Indo-Russian business council has already been established at the initiative of the Chamber of Commerce and Industry of the Russian Federation, no steps have been initiated by the council, officials added. However, Russia claims that its part of the council, with the help its ministry of economic development and trade, is designing a special Website with a huge database to facilitate business communities and acquaint them about new opportunities in both the countries.
In 2008, at the second session of the India-Russia Forum on Trade and Investment, which saw a participation of over 500 business representatives from the public and private sectors from both the countries, it was decided that a CEO?s council would be formed, akin to a joint business council. This was expected to kick-start the ?B2B? interaction. However, not a single meeting of the CEO?s council has taken place since then. ?This CEO council exists merely on paper, just as the joint task force that was set up then has failed to achieve any major results,? officials added.
Problems also abound in the banking operations in Russia. While in India the banking system permits the transfer of funds /payments to suppliers anywhere in the world through bank drafts, telegraphic transfer, RTGS and SWIFT, in Russia such systems do not exist. The transfer of funds and payments in Russia are difficult, both in terms of time involved, as well as costs involved. It has also been reported that many Russian banks do not offer cheque facilities, MEA officials added.