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Modi-Putin Meet Signals New Dimensions For Indo-Russian Partnership

04/01/2016 8:33 AM IST | Updated 15/07/2016 8:25 AM IST
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MOSCOW, RUSSIA - DECEMBER,24: (RUSSIA OUT) Russian President Vladimir Putin (R) listens to Indian Prime Minister Narendra Modi (L) during their meeting in Grand Kremlin Palace, in Moscow, Russia, December,24,2015. Narendra Modi is having a two-days state visit to Russia. (Photo by Mikhail Svetlov/Getty Images)

Three developments emerged clearly from Prime Minister Narendra Modi's recent visit to Moscow for the 16th Indo-Russian annual summit with President Vladimir Putin.

First, making bilateral ties more broad-based by giving the economic partnership between the two nations its due importance. Secondly, efforts towards transforming Indo-Russian strategic ties from a buyer-seller relationship to that of a partnership. And finally, restoring the exclusivity of Indo-Russian ties irrespective of any foreign policy transformation that each may undergo.

Before Mr Modi departed for Moscow a number of analysts said India's ties with Russia are top heavy -- leaning too much on the politico-strategic aspect, leaving its base shallow with no significant civilian or commercial contact.

Modi seems to have taken a good note of it as is evident from the 16 agreements signed across diverse sectors, including the manufacturing of nuclear reactors, solar energy plants, railways and helicopter.

Modi, in a stark departure from the usual framework of a bilateral summit, intentionally included the private sector in the strategic partnership.

It is amazing how despite a huge potential of economic interdependence, bilateral trade between India and Russia is only $10 billion.

Russia, today, is at an interesting economic crossroad. It has not only reached the second year of Western sanctions, but is also going through an all time low with one of its significant trade partners -- Turkey.

As both sides aspire to take bilateral trade to $30 billion in the next 10 years, Modi in his bilateral press statement said, "I see Russia as a significant partner in India's economic transformation."

On India's part, the first step it could take is to identify the opportunities left open by the West and Turkey in Russia.

Moscow is also a gateway for India to Central Asia. In this regard a significant move by PM Modi was the effort to move forward on the India-Eurasian Economic Union (EEU) Free Trade Agreement (FTA).

The FTA between India and the EEU -- comprising Russia, Belarus, Armenia, Kyrgyzstan, and Kazakhstan -- offers India access to a huge market with a population of over 180 million, with a joint GDP of an estimated $2.7 trillion.

As Russia tries to re-calibrate its economic orientation towards the Asian region, India, as one of the fastest growing G20 economies can be a significant partner for Russia. Experts say India's National Infrastructure Fund provides a major investment opportunity to Russian "big-pocketed billionaires" currently facing hurdles to break through the traditional European financial markets.

In a joint statement with Mr Modi, President Putin emphasised, "High tech, Innovation, energy, aircraft building, pharma and diamonds promising areas for India Russia cooperation."

Steps towards building a more versatile Indo-Russian partnership was already laid in 2014 when the two countries announced a 'Druzhba-Dosti' vision.

Overall strategic cooperation remained the dominant factor in the bilateral summit. But this time there was a clear thrust on localised manufacturing.

Modi's pet project "Make in India" got a major boost as the agreement to manufacture Kamov 226 helicopters in India was sealed. The deal was cleared by the Defence Acquisition Council (DAC) chaired by Defence Minister, Manohar Parrikar in May this year.

As per the IGA, 60 helicopters will be supplied by Russia in fly-away condition while 140 of them will be produced in India

Additionally, India and Russia also moved forward on the agreement to build 12 Russian nuclear reactors. According to a programme of action agreed between India's Department of Atomic Energy and the Russian State Atomic Energy Corporation (Rosatom), there will be localisation of manufacturing in India of Russian-designed nuclear reactor units.

[T]he Indo-Russian partnership should gather more steam in 2016, especially as announcements concerning a number of big-ticket deals including S-400 are yet to be done.

Observers say, Modi, in a stark departure from the usual framework of a bilateral summit, intentionally included the private sector in the strategic partnership. This was to ensure that Make in India is a significant component of the deals India signs with Russia.

Several major defence-sector CEOs including ones from Reliance and TATAs accompanied the PM at the bilateral summit. For now, India is likely to emerge as a potential destination for the Russian defence sector for its maintenance, repair and overhaul (MRO) projects.

In fact, a significant outcome on the sidelines of the Modi-Putin summit was the signing of a manufacturing and maintenance deal potentially worth $6 billion between Reliance Defence and Russia's Almaz-Antey, the maker of an air defence system.

Additionally, the Deputy Minister Andrey Boginskiy of the Russian Ministry of Industry and Trade had said that Russian Helicopters and its subsidiaries and component manufacturers are ready to supply kits for assembly in India as well as to localise production.

India, which accounted for 28% of Russian military equipment exports in 2014, can expect a joint venture with Russia's top aircraft manufacturer Sukhoi for the maintenance and spares production of its combat aircraft Su30.

The Tata Group is reportedly in advanced stage of talks with Sukhoi to set up a joint venture to manufacture spares for Sukhoi fighters in India.

However Russia still remains hesitant in transferring technical know-how for its advanced military systems like the S-400 air defence missile systems, known as one of the "crown jewels" of Russia's defence capability.

[W]ith a diversified supplier base India is at a better position today to negotiate deals with Russia especially concerning technology transfer and co-production.

While India's ability to absorb the technical complexity has been cited as one of the reasons, another probable cause could be New Delhi's recent diversification of its defence ties, especially with the US.

Similarly the closer defence partnership between Russia and Pakistan hasn't gone down too well with India.

However, the current summit hints towards a certain two-way expectation that both India and Russia will maintain a balance and be sensitive to each other's interests as they go about transforming their geopolitical or bilateral postures. That's what Putin's statement seems to underscore when he called India "a great power carrying out a balanced and responsible foreign policy."

Going forward, the Indo-Russian partnership should gather more steam in 2016, especially as announcements concerning a number of big-ticket deals including S-400 are yet to be done. Needless to say, defence will remain at the centre-stage of the bilateral relationship, although with a diversified supplier base India is at a better position today to negotiate deals with Russia especially concerning technology transfer and co-production.

This article was first published in BBC (Hindi)

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