India’s negative Balance of Trade (BoT) in fiscal year 2023-24, standing at a worrying $73.51 billion, underscores the precariousness of its economic engagements with key global partners. While the trade dynamics with Russia and the United States showcase divergent trends, they share one commonality: both require recalibration. Strengthening these trade ties, while avoiding geopolitical pitfalls, is a task of finesse that India must urgently master.
India’s imports from Russia totalled a staggering $60.07 billion in 2023, with energy, arms, and raw materials constituting 90 percent of the value. Meanwhile, India’s exports to Russia — worth only $4.06 billion — primarily included pharmaceuticals, chemicals, and machinery, leaving a yawning trade deficit of $56 billion. This imbalance is troubling for a relationship steeped in decades of trust and strategic alignment.
The reasons behind this disparity are manifold. India’s lack of advanced manufacturing capabilities and stringent Russian trade regulations inhibit the growth of Indian exports. Despite concerted efforts, including recent dialogues such as the Indo-Russia Business Forum held in Mumbai, progress remains slow. External Affairs Minister S. Jaishankar’s calls to dismantle trade barriers, promote local currency settlements, and enhance connectivity through international transport corridors are promising, but the results are yet to materialize.
Russia’s strategic pivot toward China, coupled with its tepid response to India’s proposals for economic diversification, signals a decline in Indo-Russian cooperation. Yet, India cannot afford to let this partnership erode further. Russia remains a counterweight to China and an indispensable supplier of military hardware. The challenge lies in fostering an economic bond robust enough to complement the existing security partnership.
On the other end of the spectrum, the United States has emerged as India’s largest trading partner. Bilateral trade reached a record $128.78 billion in FY23, with India enjoying a surplus of $28.3 billion. Exports to the U.S., valued at $78.54 billion, include gems, pharmaceuticals, and petroleum products, while imports, amounting to $50.24 billion, largely consist of crude oil, defense goods, and coal.
This trade relationship is buoyed by shared economic and strategic interests. The U.S. is not only a major trade partner but also a key source of foreign direct investment. Nevertheless, the alliance is not without its hurdles. Tariff and non-tariff barriers, intellectual property disputes, and regulatory complexities often mar the relationship. India’s data localization policies and reluctance to join U.S.-led trade frameworks have further strained ties.
Opportunities for collaboration abound, particularly in semiconductors, defence, and technology. Joint ventures in advanced manufacturing and infrastructure could deepen mutual dependencies and enhance economic synergy. However, the fragility of this partnership, shaped by domestic political pressures in both countries, demands careful navigation. India’s pursuit of strategic autonomy occasionally irks Washington, while U.S. attempts to influence Indian domestic policies often elicit pushback.
Tightrope Walk
India’s simultaneous engagements with Russia and the U.S. require a nuanced approach that transcends economic calculus. Both partnerships are critical not only for trade but also for their broader strategic implications. Yet, the balancing act is fraught with complexities.
With Russia, India must tread carefully. The growing Sino-Russian nexus and Moscow’s unease over India’s deepening ties with the U.S. are sources of friction. Nevertheless, India’s historical reliance on Russian defence systems and its role as a counterbalance to China demand sustained engagement. Economic interdependence, built on sectors such as energy collaboration and technology transfer, could help stabilize the relationship.
In contrast, the India-U.S. relationship, while economically rewarding, remains geopolitically tenuous. Frictions over trade policies and divergent worldviews persist. India must leverage its strategic location and burgeoning market to cement its position as an indispensable partner to the U.S., especially in the Indo-Pacific. Enhanced industrial cooperation and co-development of high-tech products could anchor this relationship in shared interests.
Balancing these relationships will require India to undertake structural reforms and adopt pragmatic diplomacy. Here are some key strategies: India must invest in high-tech manufacturing to reduce its trade deficits. Collaborations in areas like semiconductors and defence manufacturing with both Russia and the U.S. could yield dividends.
Projects like the International North-South Transport Corridor (INSTC) with Russia and strategic participation in Indo-Pacific trade initiatives with the U.S. can facilitate smoother trade flows.
The promotion of local currency trade by reducing dependence on the dollar, particularly in Indo-Russian trade, could insulate transactions from geopolitical disruptions and make Indian exports more competitive.
India’s economic future hinges on its ability to navigate the complexities of these two pivotal partnerships. Its relationship with Russia is a legacy of Cold War pragmatism; its bond with the U.S. is a product of 21st-century realpolitik. Balancing the two is not merely a matter of trade but a test of India’s diplomatic dexterity in shaping a multipolar world.
In the words of Jaishankar, this “tightrope walk” is unavoidable—but if India steps deftly, it could find itself not only balancing but leading.
By forging stronger economic ties while safeguarding its strategic autonomy, India has the potential to emerge as a linchpin in global power dynamics. It is a cliché to say the stakes are high, but so too are the rewards for a nation poised at the crossroads of opportunity and responsibility.
(The author is a retired Indian Naval Aviation Officer and a geo-political analyst. Views Personal.)
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