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‘India and Russia have doubled rupee-rouble payments in 2024’

‘India and Russia have doubled rupee-rouble payments in 2024’

Editor 16 Jul 6 min
Tags: GS 2

Why in the news?

The Hindu: Page 04
Syllabus: GS 2: International Relations
Practice Question for Mains: India-Russia relations are crucial for India's strategic autonomy in a multipolar world." Evaluate the geopolitical importance of India-Russia relations in balancing India's ties with the West and China.

Sberbank notes rising trust in the Indian rupee despite sanctions, with transactions and rupee deposits surging.Prime Minister Modi’s Moscow visit aims at a $100 billion trade target by 2030, urging Indian firms to expand into sectors like auto, chemicals, and electronics in Russia.

  •   Sberbank reports a growing trust in the Indian rupee among its clients, with a doubling of rupee-rouble payments since last year despite U.S. and EU sanctions.
  •   The volume of transactions handled by Sberbank increased by 80% in the first half of 2024.
  •   Indian corporates have increased rupee deposits significantly, with a sixfold rise in corporate deposits in 2024.
  •   Prime Minister Narendra Modi’s recent visit to Moscow aims to boost economic ties, targeting a $100 billion trade goal by 2030 with Russia.
  •  Indian businesses are urged to explore sectors like auto components, aviation, chemicals, electronics, machinery, and agriculture for exports to Russia.
  •   There is concern that Chinese businesses are benefiting from sanctions by filling the void left by Western companies, urging quicker action from India to strengthen trade relations with Russia.


Historical Overview of India-Russia Relations

India and Russia share a long-standing and strategic relationship that has evolved since the establishment of formal diplomatic ties in April 1947, just prior to India's independence. Historically, Russia (then the Soviet Union) has been a key partner for India, with the relationship shaping various aspects of India's foreign policy. The journey of India-Russia relations can be broken down into several phases:

Initial Engagement (1947-1955)

The early relationship between newly independent India and the Soviet Union was marked by ideological differences, with limited interaction. Soviet leadership under Stalin was cautious, viewing India’s independence with suspicion. This dynamic began to shift in the mid-1950s, particularly with Indian Prime Minister Nehru's visit to Moscow in 1955 and Khrushchev’s reciprocal visit to India. These interactions led to significant projects like the establishment of the steel plants at Bhilai and Bokaro, symbolizing growing cooperation.

The Cold War Era (1955-1991)

During the Cold War, India and the Soviet Union forged a strong diplomatic, military, and economic partnership. The USSR became a major arms supplier to India, playing a critical role during conflicts like the Sino-Indian War of 1962 and the Indo-Pak War of 1971. A landmark in bilateral ties was the 1971 Treaty of Peace, Friendship, and Cooperation, which included provisions for mutual consultations in the face of security threats. The relationship during this period was essential for India’s defense and geopolitical strategy.

Post-Cold War Realignment (1991-2000)

After the collapse of the Soviet Union in 1991, the relationship weakened as both nations faced economic challenges and shifts in the global order. Despite the signing of the 1993 Treaty of Friendship and Cooperation, ties between India and Russia became strained, and collaboration in various sectors declined. The dissolution of the Soviet Union led to a period of readjustment in bilateral relations.

Strategic Partnership Era

In 2000, the signing of the ‘Declaration on the India-Russia Strategic Partnership’ marked a turning point, elevating relations to a new level. This partnership has fostered closer cooperation in areas such as defense, trade, science, technology, and culture. The annual India-Russia Summit has served as a key mechanism for deepening engagement across these sectors.

Key Areas of India-Russia Cooperation


1. Geopolitical Cooperation

India and Russia share close geopolitical ties, particularly through regional platforms like BRICS, the Shanghai Cooperation Organization (SCO), and the G20. India has maintained a balanced stance on contentious issues like Russia’s conflict with Ukraine, choosing not to participate in UN votes against Russia and continuing energy imports despite Western sanctions. Both nations advocate for a multipolar world order and jointly oppose terrorism in all its forms.

2. Defense Cooperation

Russia remains a vital defense partner for India, supplying a significant portion of India’s military hardware. The defense relationship encompasses:

  • Military Hardware Transfers: India’s licensed production of Russian-origin T-90 tanks and Su-30 MKI aircraft, along with agreements for advanced systems like the S-400 Triumf, illustrates this cooperation.
  • Joint Military Exercises: Exercises such as the tri-service ‘INDRA’ and Avia Indra air force drills strengthen interoperability.
  • Institutional Mechanisms: The India-Russia Inter-Governmental Commission on Military Technical Cooperation (IRIGC-MTC) and the 2+2 Dialogue framework, involving defense and foreign ministers, reflect the depth of collaboration.

3. Economic Cooperation

Bilateral trade and economic cooperation have grown significantly, with trade volumes reaching around $65 billion. India’s increased imports of discounted Russian crude oil, post-Ukraine war sanctions, have further strengthened this partnership. India also plays a role in the development of Russia’s Far East, providing financial and personnel assistance. A five-year cooperation program (2021-2025) is being finalized to bolster development in this resource-rich region.

4. Scientific and Research Collaboration

Since the Cold War, scientific and research collaboration has been a key pillar of India-Russia relations. Key areas include:

  • Nuclear Energy: Cooperation on civil nuclear energy is exemplified by the Kudankulam Nuclear Power Plant (KKNPP) in India. Future plans include the construction of 12 additional reactors.
  • Space Collaboration: Russia supports India’s Gaganyaan mission by training Indian astronauts. Additionally, Indian institutions like C-DAC collaborate with GLONASS on satellite navigation technologies.
  • Health: India approved Russia’s Sputnik V vaccine under emergency use during the COVID-19 pandemic.

5. Cultural and Diaspora Engagement

Cultural ties between India and Russia remain strong, with Russian institutions offering courses in Hindi, Tamil, Marathi, and other Indian languages. Indian cultural organizations in Russia, such as the Indian Cultural Centre, promote cultural exchanges. The Indian diaspora in Russia, though small (30,000-40,000), plays a significant role in business and education.

Significance of India-Russia Relations

1. Geopolitical Importance

Russia’s support for India on critical issues, such as its bid for a permanent seat in the UN Security Council and the Kashmir issue, enhances India’s strategic standing. In the context of rising Chinese aggression, Russia could also act as a stabilizing force, mitigating tensions between India and China.

2. Defense

Despite India diversifying its defense imports, Russia remains a crucial supplier of military equipment. With a significant portion of India’s defense inventory still of Russian origin, maintaining strong defense ties is essential, especially given China’s growing assertiveness on India’s borders.

3. Economic Stability

India’s purchase of discounted Russian oil has helped cushion its economy against inflation caused by rising global crude prices. India is also exploring the possibility of a Free Trade Agreement (FTA) with the Eurasian Economic Union, which could further boost trade ties.

4. Strategic Balancing

India’s balanced relationship with Russia provides it with greater leverage in negotiations with Western powers. It also helps offset China’s influence in Eurasia, ensuring that India can navigate the complexities of great power competition without compromising its national interests.

Challenges in India-Russia Relations

  1. Growing India-US Ties: India’s deepening defense and strategic ties with the US, including foundational agreements like LEMOA, COMCASA, and BECA, have caused some friction with Russia, which has responded by strengthening ties with China and Pakistan.
  2. Russia’s Dependence on China: As Moscow grows closer to Beijing, concerns have arisen that Russia’s neutrality in Sino-Indian tensions may be compromised, potentially undermining India’s strategic interests.
  3. Trade Imbalances: Although bilateral trade has increased, India's exports to Russia remain relatively small, creating a trade imbalance that needs to be addressed.
  4. Defense Supply Delays: Russia’s defense deliveries, including the S-400 systems, have faced delays due to the ongoing Ukraine conflict, affecting India’s defense readiness.
  5. Ukraine Conflict: The Russia-Ukraine war has placed India in a diplomatic bind, as it balances its energy and defense needs with international pressure to condemn the invasion.

The Way Forward

  1. Neutral Mediation in the Ukraine Crisis: India should continue its neutral stance, advocating for adherence to international laws and offering mediation between Russia and Ukraine.
  2. Addressing Defense Supply Chains: Joint ventures between India and Russia can help mitigate supply chain disruptions in defense equipment.
  3. Eurasian Focus: India and Russia should prioritize their involvement in the Eurasian region, expediting the International North-South Transport Corridor (INSTC) and exploring new economic partnerships.
  4. Strategic Messaging to the West: India must convey to Western powers that Russia remains a vital part of its foreign policy, ensuring that its relations with both Russia and the West are mutually beneficial.


UPSC Prelims PYQ : 2019

Ques : Recently, India signed a deal known as ‘Action Plan for Prioritization and Implementation of Cooperation Areas in the Nuclear Field’ with which of the following countries?

(a) Japan

(b) Russia

(c) The United Kingdom

(d) The United States of America

Ans: b)


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