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In the new reality, our country is forced to establish new economic contacts and renew old ones. Let’s talk with an expert about the potential of cooperation with India
About the expert: Aleksey Kupriyanov is the Head of the South Asia and Indian Ocean Group of the Center for Asia-Pacific Studies of IMEMO RAS.
The trend of interest towards the East
The turn to the East, which began back in the 1990s and which our orientalists spoke about, is a long-term trend. The fact that the center of world economic life is shifting to the Asia-Pacific region became clear back in the late 1980s. But then the collapse of the Soviet Union and the economic crisis prevented the turn in that direction.
Since the 2000s, the Russian government has joined the dialogue. But still, by and large, it was just talk: oligarchs, officials, businessmen still preferred to turn to the West. Because in the general sense, the West is comfortable and good. Relations have already been established there, there are familiar partners, it is clear how to do business with them. But China very quickly expanded its zone of presence, and it became clear that the turn of the economy to the East was inevitable.
Trade with India: the USSR and our days
India is still terra incognita, “uncharted land” for a huge number of Russian businessmen and officials. We must learn to interact with India, with which our country has practically not established contact in recent years. Our trade turnover with this country was ridiculous – we reached a maximum of $11 billion. This is very little. Officially, our country and India are especially privileged strategic partners. However, for example, its trade with “unprivileged” China has already risen to $90 billion.
Why did it happen? In Soviet times, the trade turnover between our countries was quite large. The USSR was one of the three key Indian trading partners.
Globally, the Soviet Union had a huge trade deficit. The country each time tried to compensate for it, connected a variety of schemes, for example, the USSR-Iraq-India triangle. The Soviet Union supplied weapons to Iraq, Iraq supplied oil to India, and India supplied the USSR with what is called kambutz, that is, household goods. Tea, cereals, rice – the country bought many goods that India could not sell on the general world market, because her industry had not yet developed enough to reach the required level of quality. And the Soviet Union took absolutely everything, plus everything – for rupees.
It was a broad friendly gesture towards India, because the rupee was much weaker than the ruble. India traded at a very great profit for itself. In 1991, after the collapse of the USSR, no one could politically support this trade. The union left India exactly when it began its ascent to the status of a great power and the fifth economy in the world, which it now occupies.
India’s Economy: Growth and Decline
The Indian economy began to grow rapidly by the end of the 1990s. So rapid that by the mid-2000s GDP growth was 9,8%. And this growth continued until the 2008 crisis, when the Indian economy began to fall. Then she jumped up very quickly. There was a compensatory growth that exceeded 10%.
The coronavirus has hit the Indian economy hard. This happened because, to a very large extent, the growth rate was ensured by the service sector, and it kept on people who left the villages for large metropolitan areas. They worked lifting jobs for a very small salary, developed their small business, worked as rickshaws – they served the middle class, who at that time lived in these megacities. And then, when all the megacities closed due to the lockdown, the villagers simply lost their livelihood and went back to the village in droves.
This great migration from cities to villages miraculously did without colossal casualties. People waited for days to be let through the cordons between the states so that they could get to the village and finally plant their crops there. But it also led to a positive result. Against the backdrop of a general decline in the Indian economy, the agricultural industry showed growth – it “pulled” the country out of the covid crisis.
Economy Support Programs
Indians began to look for opportunities to deal with the crisis. In particular, it was because of this that the program was launched Make in India launched a program to restructure the entire labor market. It included programs for the provision of education, for the retraining of personnel, that is, for the transformation of yesterday’s peasants into workers that will be required already in the post-industrial economy.
All these programs were launched before the start of the coronavirus epidemic. The pandemic put them on pause, and it is not very clear what will happen next.
With the onset of the Sino-American Cold War, US companies came under pressure from the government. It forced them to leave China, that is, to curtail their production facilities there and relocate. In China, there was a high-quality and cheap labor force, which made it possible to reduce production costs. Then American companies began to look for new opportunities and settled on India: the population is 1,5 billion people, people do not claim high salaries, and most importantly, it is an English-speaking workforce, that is, you can always find a common language with them. In this alignment of new production chains, which are now trying to bypass China, the Indian leadership saw an opportunity to give impetus to the development of the country.
our country as a lever for India’s development
When our country was cut off from Western markets, it became clear that in the near future it would need new markets to implement its existing technologies. India got a chance to turn into a giant hub capable of receiving oil, gas, fertilizers, and grain. This is what Indians are willing to buy.
On the other hand, India is that intermediate country through which our country can get all the resources it needs: Western technologies, finance, investments and indirectly enter the Western market.
Areas of cooperation between our country and India
The development of Russian-Indian relations mainly takes place in the field of military-technical cooperation: energy, science and technology, space. Soon, contacts will probably be established in the fields of pharmacology, biotechnology, high-tech, and the supply of agricultural products.
It’s hard to rank which one will shoot faster, because it depends on how quickly companies realize that they have no alternative. If IT companies or pharma are the first to realize this, this is one thing. If negotiations on the creation of a free trade zone drag on, then, most likely, something else will “shoot”, for example, an increase in the export of chemical products.
At first, our country is required to finally ratify the free trade area agreement between India and the Eurasian Economic Union.
Secondly, it is necessary that all transport corridors work efficiently. Now we see signs of activation in the North-South corridor, on which everyone has long put an end to it. From India, the goods are sent to the Iranian port of Chabahar, then along the Iranian railways to the North, from there from the northern Iranian ports to Astrakhan, and from there to Central Russia. Everyone is used to the fact that this is a problem corridor, because Iran is under sanctions. The condition of the railways there is poor – no one believed in activation. But now the interest of Indian small and medium-sized businesses in cooperation with Russia is clearly visible.
Largely due to the fact that Indians buy oil and gas from our country, they are not going to abandon their investments in our oil and gas complex. But you need to understand that our country will not turn into a replacement for Saudi Arabia for India. The Indians want our country to continue to be a market for their products and a reliable technical partner. This is not even about the military-industrial complex, but about oil and gas production technologies, offshore development, underwater and space research. Quite unexpectedly, the knowledge economy, which we did not rely on, comes to the fore. If we talk about the IT sector, our country will need to cooperate with the Indians to establish the supply of hardware. This is due to the fact that due to sanctions we are losing access to a very large number of components. Some we can compensate through China, but not all.
Cultural connections
our country knows Indian culture quite well, and they know ours, mainly thanks to the Soviet past. But it would be good, of course, to be more active in the Indian intellectual market now. Earlier in the USSR there was radio broadcasting in Indian languages: it would be possible to return it in the podcast format. You can also work in the book direction – Indian books were sold in the USSR in huge editions, and translations of Russian classics were sent to India. It was a very powerful charge of soft power, immersion in a friendly culture, but it needs money.
The more we know about this country, the more we get to know its culture and way of life, the better we will understand each other. This is very important now.
Tourism
It would be great to work on tourism ties with India, because this is a subcontinent with a huge number of climatic zones, with its own customs and traditions. Tourist activities there are varied. But India is far away, and our country has its own ideas about it: first of all, we, most likely, will remember not about the Taj Mahal, but about poisoning and dirt on the streets. We need to restore cultural ties and remove all barriers between countries, all this will pay off handsomely.
Ecology
In India, environmental issues are acute: New Delhi is one of the most polluted cities in Asia. But solar energy is actively developing there, and India is positioning itself in this area as a world leader. It is beneficial for them to use the energy of the sun to provide for the rural population, which makes up the bulk of the Indians, and not to build thermal power plants and hydroelectric power stations.