Report of the India-Russia Joint Study Group Moscow – New-Delhi 2007 1 List of Contents Chapter I Introduction.……………………………………….5 Trends in Indian and Russian economies as trading economies……………………..6 The Russian Reforms and the Indian Reforms………………………………………8 India and RTAs (Regional Trading Arrangements)………………………………….9 Russia and RTAs……………………………………………………………………10 Appendix 1.1……………………………………………………………………….11 Appendix 1.2 ………………………………………………………………………12 Chapter II Bilateral trade between India and Russia…….13 Basic outline of the nature of bilateral trade between India and Russia……………13 An evaluation of Indo-Russian trade- post 1991…………………………………...14 Limited impact of debt repayment as a stimulus to bilateral trade during 1990s…..15 The WTO factor…………………………………………………………………….15 Institutional mechanism for promoting bilateral trade……………………………..15 Image of Russia and Russian companies in India and image of Indian companies in Russia……………………………………………………………………………….17 North-South Transport Corridor……………………………………………………17 Chapter III Trade in Goods………………………………….18 Analysis of the Nature and Composition of the bilateral trade in goods between India and Russia…………………………………………………………………………..18 Major Indian exports to Russia……………………………………………………..18 Major Russian exports to India……………………………………………………..20 Potential for expansion of trade in goods…………………………………………..20 Overall estimates of the potential increase in trade in goods: results of the model analysis .......................................................................................................................21 Potential Sectors for Expansion of trade……………………………………………21 Potential Sectors for Expansion of Exports from India to Russia…………………22 Pharmaceuticals .........................................................................................................22 Agriculture products and processed food.................................................................23 Spices..........................................................................................................................24 Tobacco ......................................................................................................................24 Ready Made Garments(RMG) ....................................................................................24 Leather........................................................................................................................25 Potential Sectors for Expansion of Exports from Russia to India…………………25 Agriculture products and processed food.................................................................25 Machinery...................................................................................................................26 Aircrafts......................................................................................................................26 Chemicals industry and fertilizers..............................................................................26 Medicine and biotechnology.......................................................................................26 Metallurgy ..................................................................................................................27 Mining.........................................................................................................................27 Cooperation in Gem and Jewellery Sector .................................................................27 Cooperation in the Energy sector ...............................................................................27 Barriers to trade and steps to overcome these barriers……………………………...28 Transportation and logistics......................................................................................28 Language and Information barriers...........................................................................29 Technical Barriers to Trade (TBT) -Certification, Standards and Regulations.........29 2 Tariff related Barriers ................................................................................................31 Trade facilitation and Customs cooperation...............................................................33 Anti Dumping and Safeguard measures .....................................................................33 Conclusion and the way forward…………………………………………………...34 Recommendations for enhancing the Indo Russian Trade in Goods……………….34 General Measures…………………………………………………………………..34 Sector specific measures……………………………………………………………36 Appendix 3.1………………………………………………………………………..42 The description of modeling estimation and forecasting procedures………………42 a) .Assessment of the Prospects for Trade and Economic Relationships between India and Russia as Assisted with the Application of the Gravity Models..........................42 C)The Findings from the Assessments of the Competitive Advantages Identified...47 Imports from India into Russia...................................................................................57 Appendix 3.2 ..............................................................................................................61 Appendix 3.3…………………………………………………………………………..65 Appendix 3.4…………………………………………………………………………..68 Appendix 3.5………………………………………………………………………….70 Appendix 3.6…………………………………………………………………………73 Appendix 3.7…………………………………………………………………………79 Chapter IV Trade in services………………………………...83 Introduction…………………………………………………………………………83 India and Russia: Bilateral Service Trade…………………………………………..83 Structure of services trade ..........................................................................................83 Recommendations to Increase Bilateral Trade in Specific Sectors………………...84 IT and IT enabled Services.........................................................................................84 Transport services.......................................................................................................86 Telecommunication Services......................................................................................88 Financial services .......................................................................................................88 Distribution services ...................................................................................................89 Research and Development Services..........................................................................89 Tourism services.........................................................................................................90 Health Services ...........................................................................................................90 Education services ......................................................................................................91 Audio visual and entertainment services ....................................................................91 Energy Services ..........................................................................................................92 Fashion Technology ...................................................................................................92 Way Forward to enhance bilateral trade and Principles for expanding services trade…………………………………………………………………………………92 Appendix 4.1………………………………………………………………………93 India and Russia Share in World Trade in Services: Appendix 4.2………………………………………………………………………94 Important Components of Trade in Services (Exports): India Total services Appendix 4.3………………………………………………………………………..95 Important Components of Trade in Services (Exports): Russia Particulars Appendix 4.4……………………………………………………………………….96 Revealed Comparative Advantage of India and Russia in various Service Sectors:96 Chapter V Investment cooperation…………………………97 Introduction…………………………………………………………………………97 Foreign direct investments in India…………………………………………………97 Foreign direct investments in Russia……………………………………………….98 3 Legislation governing Foreign Investment in Russia……………………………….99 Special Economic Zones (SEZs) in India…………………………………………..100 Foreign Direct Investment (FDI) in SEZs in India...................................................100 Incentives and facilities offered to SEZs in India.....................................................101 Special economic zones in Russia………………………………………………...102 Indian investments abroad………………………………………………………...103 Russian business abroad…………………………………………………………..104 Investment co-operation between India and Russia………………………………105 Potential Areas for Investment……………………………………………………106 Investment in Russia .................................................................................................106 Investments in India..................................................................................................107 Institutional and legal measures for increasing the investment cooperation between the two countries…………………………………………………………………………108 Chapter VI Bilateral Economic Cooperation in other areas………………………………………………………….108 Science and Technology ...........................................................................................109 Cooperation in the Energy sector.............................................................................109 Cooperation in Space sector....................................................................................110 Metallurgy and Mining.............................................................................................111 Cooperation between quality inspection and certification organizations.................111 Cooperation in the sphere