India and the Russia-led Eurasian Financial Union (EAEU) on Wednesday kick-started negotiations for a commerce deal as talks with the US broke down after US President Donald Trump referred to as India a “lifeless financial system” and raised tariffs on Indian merchandise to 50 per cent, highest globally.
The restart of commerce negotiations with EAEU, which has a mixed GDP of $6.5 trillion, comes after New Delhi has ostensibly begun a pivot in direction of China, Russia and Brazil within the face of US financial coercion. After the fallout with the US over commerce deal negotiations, Prime Minister Narendra Modi has had a cellphone name with Brazilian President Lula da Silva, Russian President Vladimir Putin and is anticipated to fulfill Chinese language President Xi Jinping later this month.
The commerce deal talks with EAEU have been stalled in early 2022 after the Ukraine struggle. The grouping includes Armenia, Belarus, Kazakhstan, Kyrgyz Republic, aside from Russia.
“India and the EAEU comprising Armenia, Belarus, Kazakhstan, Kyrgyz Republic and the Russian Federation signed the Phrases of Reference (ToR) to launch negotiations on a Free Commerce Settlement (FTA) as we speak in Moscow. The ToR was signed by Extra Secretary, Division of Commerce Ajay Bhadoo, and Deputy Director, Commerce Coverage Division, EEC, Mikhail Cherekaev,” the commerce and trade ministry mentioned.
The ministry mentioned that the ToR gives the framework for negotiations and is anticipated to unlock untapped commerce potential, enhance investments and set up a stronger, sturdy India–EAEU financial partnership. “Either side reaffirmed their dedication to the early conclusion of the settlement and to constructing a long-term institutional framework for commerce cooperation,” the ministry mentioned in an announcement.
The commerce turnover between India and the EAEU stood at $69 billion in 2024, a 7 per cent enhance over 2023. “With a mixed GDP of $6.5 trillion, the proposed FTA is anticipated to increase market entry for Indian exporters, help diversification into new sectors and geographies, improve competitiveness towards non-market economies, and ship important advantages to Micro, Small and Medium Enterprises (MSMEs),” the ministry mentioned.
Challenges in Russia-India commerce
When Russia invaded Ukraine in February 2022, Moscow’s share in New Delhi’s oil imports was lower than 2 per cent. With a lot of the West shunning Russian crude following the invasion, Russia started providing reductions on its oil to prepared consumers. Russia now accounts for 35-40 per cent of India’s complete oil imports by quantity.
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Nevertheless, India’s exports to Russia have solely doubled from $2.39 billion in FY19 to $4.88 billion in FY25, widening the commerce deficit to over $60 billion. To stability the commerce with Russia, India has additionally restarted taking measures to ease rupee-ruble commerce after talks of organising rupee-ruble commerce with Russia collapsed final yr. Authorities officers mentioned that recent talks have begun. In distinction, Russia-China has arrange a mechanism for commerce in home foreign money, lowering the reliance on the US greenback.
Stress on India over US tariffs
With India going through steep US tariffs, exporters are searching for newer markets. Exporters mentioned that Russia might turn out to be a key marketplace for Indian textile and pharmaceutical merchandise. India primarily exports engineering and digital items to Russia. Medication and prescription drugs are the third highest export merchandise.
Stressing on the necessity for diversification, a Kotak analysis report on Wednesday mentioned that the US’ reciprocal tariff of 25 per cent on Indian exports, even with out the extra penal 25 per cent tariff later this month, might exert strain on items exports.
“Relying on the extent of tariff pass-through and the worth elasticity of US imports, annual export losses could possibly be within the vary of $0-35 bn, with dangers skewed towards the upper finish. In a state of affairs the place tariffs rise to 50 per cent, the whole non-exempted export basket (round US$55 bn) could possibly be in danger yearly,” the report mentioned.
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A Crisil report mentioned the transfer to impose a further 25 per cent tariff with impact from August 27, 2025 as a penalty for importing crude oil from Russia will make Indian exports to the US unviable for many together with ready-made clothes (RMG), chemical compounds, agrochemicals, capital items and photo voltaic panel manufacturing, which have sizable commerce publicity to the US.