India–Russia Trade: From Soviet-Era Industrialisation to Energy Security and a New Economic Partnership

India–Russia economic relations are often discussed through the lens of defence cooperation, geopolitical alignment and crude oil. Yet their economic history is considerably broader. It encompasses India’s early industrialisation, Soviet-assisted public-sector enterprises, the Planning Commission’s development strategy, rupee–ruble trade, nuclear power, fertilisers, energy security and the emergence of BRICS as a platform for economic cooperation.

The relationship has entered another period of transformation. Bilateral merchandise trade reached US$68.7 billion in the financial year 2024–25, but India exported only US$4.9 billion to Russia while importing US$63.8 billion. The resulting imbalance presents a central question for the future: can India convert its expanding economic engagement with Russia into a more diversified partnership that supports Indian manufacturing, agricultural exports, technology and employment?

The answer requires understanding not only the scale of current trade, but also the institutions, industrial capabilities and financial mechanisms that shaped the relationship over more than seven decades.

1. The historical foundations: Trade as an instrument of development

India and the Soviet Union developed closer economic relations after Indian independence in 1947. Both countries were pursuing industrial development, although their political and economic systems differed considerably.

India adopted a mixed economy in which private enterprise operated alongside public-sector enterprises and state-led development planning. The Soviet Union had an established system of central planning and extensive experience in building heavy industry.

For India, Soviet cooperation offered access to industrial technology, engineering expertise, project financing and trade arrangements at a time when foreign exchange was scarce and domestic industrial capacity was limited.

For the Soviet Union, cooperation with India also represented an opportunity to develop economic and diplomatic relations with a major newly independent country.

This relationship was not simply a matter of buying and selling goods. It helped India develop capabilities in sectors that required substantial investment, technical expertise and long construction periods.

The historical importance of this cooperation is reflected in research published by Cambridge University Press, which identifies Soviet and Eastern European economic assistance and bilateral trade arrangements as significant contributors to India’s industrialisation strategy.

The Bhilai Steel Plant: An industrial milestone

One of the most recognisable examples was the Bhilai Steel Plant in present-day Chhattisgarh, developed with Soviet technical assistance.

Established during the early years of India’s planned industrialisation, Bhilai became an important part of the country’s steel-making capacity. Its significance extended beyond steel production: a major integrated plant also required engineers, technicians, transport networks, power infrastructure, suppliers and industrial training.

The project illustrated the logic of India’s early development strategy. Rather than relying entirely on imported finished industrial products, India sought to establish the domestic capacity to manufacture the materials required for infrastructure, railways, machinery and construction.

Soviet assistance also contributed to industrial development in other sectors, including heavy engineering, power generation, oil exploration and public-sector manufacturing. ONGC and BHEL are frequently cited in accounts of the broader industrial relationship, although the precise form of assistance varied by project.

The lasting lesson is that industrial cooperation can create productive capacity that remains useful long after an individual trade contract has ended.

2. The Planning Commission and the Soviet development model

India established its Planning Commission in March 1950. The institution became central to the country’s strategy of allocating resources, expanding infrastructure and building industrial capacity.

The Second Five-Year Plan, covering 1956–61, placed considerable emphasis on heavy industry and capital goods. Economist P. C. Mahalanobis developed the analytical framework associated with this strategy, which prioritised investment in the productive capacity needed for long-term economic growth.

Soviet planning experience influenced Indian economic thinkers and policymakers, although India did not simply copy the Soviet system. It retained elections, a mixed economy and a substantial private sector. Its development strategy emerged from Indian conditions and debates.

Cambridge University Press’s historical analysis notes that Soviet and Eastern European economic and technical assistance helped implement India’s chosen industrialisation strategy. It also identifies bilateral trade and payments agreements as important in expanding trade despite limited foreign exchange.

This is an important distinction. The relationship was valuable not only because the Soviet Union supplied machinery, but because industrial projects fitted into a broader national development programme.

India’s contemporary priorities differ from those of the 1950s. The country now has a much larger private sector, deeper financial markets and an established manufacturing base. Nevertheless, the underlying policy question remains relevant: how can international economic partnerships contribute to domestic productive capacity rather than merely increase imports?

For modern India, the answer lies in applying that principle to advanced manufacturing, pharmaceuticals, energy technology, fertilisers, transport engineering, electronics and industrial research.

3. Rupee–ruble trade: How India and the Soviet Union managed foreign exchange

One of the most important features of historical India–Soviet economic cooperation was the bilateral rupee–ruble trade and payments arrangement.

India faced foreign-exchange constraints during its early development decades. Importing machinery, equipment and technology required access to currencies accepted by international suppliers. Bilateral trade with the Soviet Union offered an alternative framework for settling transactions.

Under the arrangement, trade payments were recorded and settled through designated banking mechanisms in the respective countries’ currencies, according to the applicable bilateral terms. Indian exports could generate rupee balances used to pay for Soviet imports, while Soviet exports generated corresponding claims under the arrangement.

This helped reduce the need to settle every transaction in US dollars or another freely convertible currency.

The mechanism was particularly relevant when India was purchasing machinery, industrial equipment and other goods from the Soviet Union while exporting Indian products in return.

It also demonstrated that the architecture of international trade is not limited to the choice of products. The currency and payment system can influence which transactions are commercially possible.

However, bilateral settlement does not eliminate the need for balanced trade. If one country exports substantially more than it imports, balances can accumulate, creating questions about how those funds can be used and whether the arrangement remains commercially sustainable.

The historical system therefore offers two lessons for today’s policymakers: local-currency settlement can support trade when conventional payment channels are constrained, but a durable mechanism also requires useful export opportunities, liquidity and workable arrangements for accumulated balances.

4. The transition from the Soviet Union to the Russian Federation

The dissolution of the Soviet Union in 1991 transformed the economic relationship.

India was simultaneously confronting a balance-of-payments crisis that led to major economic reforms in 1991. Industrial licensing, trade policy, foreign investment and the role of the private sector subsequently underwent significant changes.

Russia inherited much of the Soviet Union’s international economic role, but the transition to a market economy changed the commercial environment. Enterprises were restructured, old trade arrangements had to adapt, and both countries began operating within a more globally integrated economic system.

The relationship nevertheless retained important foundations: industrial links, defence cooperation, scientific exchanges, energy projects and established diplomatic channels.

In October 2000, the two countries signed the Declaration on the India–Russia Strategic Partnership. This provided a framework for expanding cooperation beyond the historical relationship and adapting it to the conditions of the twenty-first century.

The evolution matters because today’s India–Russia trade cannot be understood simply as a continuation of Soviet-era arrangements. The relationship now operates through commercial enterprises, international commodity markets, private investment, modern banking, global supply chains and multilateral economic institutions.

5. Energy security: Why Russian oil became central to India’s trade

Energy has become the dominant component of contemporary India–Russia merchandise trade.

India is one of the world’s largest consumers of energy and imports a substantial proportion of its crude oil requirements. Imported crude supports transport, manufacturing, petrochemicals, aviation, agriculture and the wider economy.

For a country of India’s size, the ability to purchase crude from multiple suppliers is an important element of energy security. Procurement decisions depend on price, crude quality, refinery compatibility, freight, insurance, contractual terms and the reliability of deliveries.

Russia became a much more significant supplier to India after the escalation of the Ukraine conflict in February 2022, when changes in global oil flows opened new commercial opportunities.

According to an analysis published by the Indian Council of World Affairs using Indian government trade data, Russia’s share of India’s crude oil imports rose from 21.6% in FY2022–23 to 35.9% in FY2023–24, remaining at 35.8% in FY2024–25.

The commercial significance is straightforward: Russian crude became a major part of India’s supply mix. This helped diversify the sources available to Indian refiners, but it also increased the importance of Russian supply conditions to India’s energy procurement strategy.

Energy security is about affordability and resilience

Energy security should not be reduced to the question of whether a country buys from one particular supplier.

A resilient strategy requires several elements:

• A diversified portfolio of oil and gas suppliers.
• Competitive procurement and transparent commercial terms.
• Adequate shipping, insurance and port capacity.
• Refinery flexibility and reliable delivery schedules.
• Compliance with applicable sanctions and other legal requirements.
• Investment in renewable energy, nuclear power, storage and energy efficiency.

Russian crude can contribute to India’s energy security, but concentration creates risks. Changes in sanctions, shipping costs, payment arrangements or supplier availability can affect the economics of procurement.

The policy objective should therefore be to preserve access to competitively priced energy while avoiding excessive dependence on any single source.

From oil purchases to wider energy cooperation

The India–Russia energy relationship extends beyond crude oil. It includes oil refining, petrochemicals, nuclear energy, upstream investments and associated industrial technologies.

The two governments’ 2024 economic cooperation programme specifically identified nuclear energy, oil refining, petrochemicals, energy infrastructure, technology and equipment as areas for further cooperation.

Nuclear energy is especially important because it connects the historical relationship to India’s long-term electricity needs. The Kudankulam Nuclear Power Plant project in Tamil Nadu represents a major example of Indo-Russian civil nuclear cooperation.

Unlike crude oil purchases, nuclear power projects involve long construction schedules, specialised equipment, technical collaboration, safety regulation and long-term fuel arrangements. Their economic contribution must therefore be assessed over decades rather than through annual import figures alone.

The larger opportunity is to move from buying energy commodities towards building a broader partnership involving infrastructure, technology, engineering and industrial capabilities.

6. Fertilisers: The connection between international trade and Indian agriculture

Energy often dominates the public discussion of India–Russia trade, but fertilisers are equally relevant to India’s agricultural security.

Indian agriculture depends on the timely availability of nitrogen, phosphate and potash-based fertilisers. Domestic production is substantial, yet imports remain important for meeting demand and securing access to raw materials.

Russia is an important supplier in global fertiliser markets. Trade with Russian producers can therefore help Indian fertiliser companies secure supplies needed for domestic agriculture.

This relationship has implications far beyond the import bill. Fertiliser availability influences farm productivity, crop planning, procurement costs and the stability of food production.

In 2024, India and Russia explicitly agreed to continue working towards sustainable long-term fertiliser supplies through company-to-company contracts under the Joint India–Russia Committee on Fertilizers. Their economic cooperation agenda also identified increasing trade in agricultural products, food and fertilisers as a priority.

Why long-term contracts matter

Fertiliser markets are affected by natural gas prices, energy costs, export restrictions, freight rates and seasonal demand. Long-term commercial arrangements can help buyers plan their requirements and give suppliers greater visibility into future demand.

However, the benefits depend on the contract’s price formula, volume commitments, delivery schedules and risk allocation.

India should continue strengthening its domestic fertiliser industry while maintaining diversified import sources. Domestic manufacturing, efficient fertiliser use, soil testing and improved nutrient management can reduce vulnerability to international price fluctuations.

Russian cooperation can form one part of this strategy, rather than replace the need for a broad and resilient supply base.

The connection between fertiliser trade and food security also reinforces a wider point: India–Russia economic relations affect not only industrial production and energy markets, but also the cost and reliability of agricultural inputs.

7. India–Russia trade today: Record growth, but a structural imbalance

The scale of the contemporary relationship is best understood through the latest complete financial-year figures cited in Indian government bilateral briefs.

These figures demonstrate both the expansion of trade and the challenge facing Indian exporters.

Russia supplies India with crude oil and petroleum products, fertilisers, coking coal, sunflower oil and precious stones and metals. India’s exports include pharmaceuticals, organic and inorganic chemicals, iron and steel, and marine products.

The relationship therefore contains a clear structural imbalance: Indian imports are dominated by large-value commodity purchases, while exports to Russia remain comparatively small.

This is not automatically evidence that the relationship is commercially disadvantageous. Imports of energy and industrial inputs can support domestic production, reduce procurement costs and help sustain economic activity. Nor does bilateral trade need to balance precisely every year.

Nevertheless, a persistent imbalance can create practical difficulties when payment arrangements generate substantial balances that cannot be readily used for additional imports or investments.

For India, the central economic objective should be to increase exports of goods and services that Russian buyers genuinely want, while maintaining access to essential imports on competitive terms.

8. The rupee–ruble question in the modern economy

The return of discussions about national-currency settlement reflects a challenge that is both historical and contemporary.

India and Russia have sought ways to facilitate bilateral trade while navigating changes in international banking, sanctions exposure, foreign-exchange availability and payment infrastructure.

In July 2024, the two governments reaffirmed their intention to develop a bilateral settlement system using national currencies. They also agreed to continue consultations on interoperability between financial messaging systems and to explore digital financial instruments.

Yet settlement in national currencies is not the same as eliminating currency risk.

An exporter receiving rubles must consider whether those funds can be converted, spent on imports, invested or otherwise used economically. An importer paying in rupees must consider the corresponding commercial arrangements and costs.

The key issue is the usability of the proceeds.

A sustainable system requires more than opening bank accounts or changing the invoicing currency. It needs sufficient trade in both directions, access to liquidity, predictable conversion arrangements, effective compliance controls and mechanisms for handling persistent imbalances.

What could improve the system?

India and Russia could explore several practical measures, subject to their legal and regulatory frameworks:

1. Expand two-way trade: Increase Indian exports in pharmaceuticals, machinery, food products, chemicals, textiles, engineering goods and services.
2. Develop commercial investment channels: Facilitate viable investments and joint ventures that create economic uses for legitimate accumulated balances.
3. Improve banking coordination: Establish transparent procedures for payment processing, documentation, settlement times and compliance checks.
4. Diversify financial arrangements: Avoid relying excessively on one bank, payment channel or settlement mechanism.
5. Strengthen digital interoperability: Assess how compatible payment and financial messaging systems can reduce friction without weakening regulatory safeguards.

The principle is straightforward: the success of a settlement mechanism should be measured by whether it enables sustainable commercial transactions, not merely by the share of invoices denominated in a particular currency.

9. India and Russia in the World Trade Organization

Both countries operate within the multilateral trading system established around the World Trade Organization.

India has been a WTO member since 1 January 1995 and was a member of the General Agreement on Tariffs and Trade, or GATT, from 8 July 1948.

Russia joined the WTO in August 2012. Their participation in the organisation means that bilateral economic relations exist alongside a broader system of trade rules, tariff commitments and negotiations.

The WTO framework is relevant to India–Russia trade in several ways:

• Tariffs: Customs duties influence the competitiveness of imported products.
• Sanitary and phytosanitary measures: Food and agricultural exports must satisfy applicable health and safety requirements.
• Technical regulations: Product standards, conformity assessments and documentation can affect market access.
• Trade remedies: Members can use trade remedies where the applicable legal requirements are met.
• Dispute settlement: WTO rules provide procedures for addressing certain trade disputes between members.

Membership does not mean that all trade barriers disappear. Nor does it prevent countries from imposing measures that are permitted under applicable WTO rules or other relevant international obligations.

The practical challenge is to ensure that trade regulations are transparent, predictable and applied consistently.

For Indian exporters of agricultural products, pharmaceuticals and manufactured goods, understanding Russian import requirements is as important as negotiating competitive prices.

10. BRICS: Expanding the economic conversation

BRICS provides another platform for India–Russia economic engagement.

Originally formed around Brazil, Russia, India, China and South Africa, the grouping has expanded its membership. It brings together countries with different economic structures and national priorities, but with shared interests in development finance, economic cooperation and a greater role for emerging economies in international institutions.

For India and Russia, BRICS provides a forum to discuss issues that extend beyond bilateral trade, including:

• Reform of global financial and economic governance.
• Development financing and infrastructure.
• Cross-border payments and financial cooperation.
• Trade facilitation and investment.
• Energy, food security and sustainable development.
• Scientific, technological and educational cooperation.

The New Development Bank, established by BRICS countries, adds an institutional dimension to this engagement by financing infrastructure and sustainable-development projects in its member countries.

However, BRICS should not be confused with a free-trade area or a customs union. Its members retain their own tariff policies, monetary systems, economic priorities and international obligations.

Nor does participation in BRICS automatically resolve bilateral payment problems or remove restrictions affecting particular transactions.

Its practical value lies in creating opportunities for dialogue, financing and coordination while preserving national decision-making.

For India, the objective should be to use BRICS to broaden access to investment and markets, strengthen development finance and encourage more resilient international economic arrangements.

11. The Shanghai Cooperation Organisation: Connectivity and regional economics

The Shanghai Cooperation Organisation, or SCO, provides another forum through which India and Russia participate in discussions on regional cooperation.

Its agenda includes security, economic relations, transport connectivity, cultural exchanges and cooperation across Eurasia.

The SCO is not a bilateral trade agreement and does not establish a common customs territory for its members. Nevertheless, discussions within the organisation can complement other regional initiatives by addressing infrastructure, transport and economic connectivity.

For India and Russia, connectivity is particularly important because geographical distance and transport costs influence the competitiveness of trade.

Three initiatives deserve attention:

A multimodal network intended to connect India with Iran, the Caspian region, Russia and destinations further north. Its commercial value depends on effective coordination between ports, railways, roads, customs systems and transit arrangements.

A proposed and developing eastern maritime connection intended to strengthen trade links between India’s eastern coast and Russia’s Far East. Its effectiveness depends on cargo demand, shipping schedules, port infrastructure and competitive freight costs.

An Arctic shipping route that could support selected trade flows, depending on seasonality, ice conditions, vessel availability, insurance and regulatory requirements. It should be evaluated on a route-specific commercial basis.

The 2024 India–Russia economic cooperation programme specifically identified the INSTC, Northern Sea Route and Chennai–Vladivostok sea connection as areas for increasing cargo movement.

These routes should be assessed by their real commercial outcomes: transit time, freight cost, reliability, customs delays and cargo volumes. Infrastructure announcements alone cannot guarantee competitive trade.

12. Beyond commodities: The case for a new industrial partnership

The next stage of India–Russia economic cooperation should not be defined exclusively by the volume of oil exchanged for manufactured products.

Both countries have capabilities and industrial needs that could support a broader partnership.

India has substantial experience in pharmaceuticals, chemicals, information technology, engineering services, automotive manufacturing, agricultural processing and digital platforms.

Russia has strengths in energy resources, nuclear technology, selected areas of engineering, industrial equipment, materials science and scientific research.

The areas of potential cooperation include:

Sector	Potential economic opportunity
Pharmaceuticals	Medicines, active pharmaceutical ingredients and compliant distribution partnerships
Fertilisers and chemicals	Long-term supply contracts, industrial inputs and potential joint ventures
Nuclear energy	Project execution, engineering, equipment and long-term technical cooperation
Agriculture and food	Spices, tea, processed foods, fruit products and agricultural inputs
Engineering and transport	Machinery, components, shipbuilding and selected manufacturing partnerships
Digital technology	Enterprise software, digital services and research collaboration
Education and science	Joint research, technical training and industrial skill development

These are opportunities, not guarantees of commercially viable projects. Each requires due diligence, market research, intellectual-property protection, regulatory compliance and a clear commercial case.

The two governments have already identified industrial cooperation, transport engineering, metallurgy, chemicals, shipbuilding, science and digital technologies as priority areas. The challenge is to translate those priorities into projects that attract investment and generate measurable economic returns.

13. The US$100 billion trade target: What must change?

India and Russia set a bilateral trade target exceeding US$100 billion by 2030 in their July 2024 economic cooperation programme. They also committed to addressing trade barriers, developing national-currency settlement, improving transport connectivity and expanding Indian exports to Russia.

Achieving the target requires more than increasing commodity imports.

Indian exporters need to identify specific Russian market opportunities, establish distributor relationships, comply with product requirements and compete on the full landed cost of their goods.

The Indian side could pursue growth in:

• Pharmaceuticals and medical products.
• Spices, tea and processed agricultural products.
• Chemicals, industrial components and engineering goods.
• Marine products and selected manufactured exports.
• IT services, professional services and other commercially viable offerings.

Russian companies, meanwhile, can explore investments in Indian manufacturing, energy infrastructure, fertilisers and industrial technology.

An effective strategy should focus on the quality of trade as well as its volume. A more balanced mix of commodities, manufactured goods, services and investment would make the relationship less vulnerable to fluctuations in a single market or sector.

It would also provide a stronger foundation for the use of national currencies by creating more opportunities for firms in both countries to spend their trade proceeds productively.

14. Reliability, diversification and the lessons of economic history

India–Russia relations have endured substantial changes: the Cold War, the dissolution of the Soviet Union, India’s 1991 economic reforms, the expansion of global trade, sanctions and the changing structure of energy markets.

That history helps explain why the relationship continues to matter. It has supported industrial development, scientific cooperation, defence production, energy supplies and commercial exchanges over different political and economic periods.

Yet reliability should not be confused with an absence of risk.

Modern trade depends on prices, legal compliance, financial infrastructure, shipping, insurance and access to alternative suppliers. Both countries must account for these realities when developing long-term contracts and investments.

For India, strategic autonomy in economic policy requires the ability to maintain multiple supply relationships and avoid excessive dependence on individual partners. For Russia, a durable partnership requires expanding access to Indian goods, services, investment and technology.

The strongest basis for cooperation is therefore practical: mutual economic benefit, predictable rules, viable projects and the ability to adapt when international conditions change.

From Soviet industrial foundations to a diversified economic future

The story of India–Russia trade is also a story of India’s economic transformation.

In the early decades after independence, Soviet cooperation helped India pursue heavy industrialisation at a time when domestic manufacturing capacity and foreign exchange were limited. Bilateral trade and payments arrangements helped make industrial transactions possible under those conditions.

Today, the economic relationship has a different structure. Energy, fertilisers and other commodities account for a large proportion of trade, while Indian exports remain comparatively small. National-currency settlement, improved connectivity and cooperation through BRICS and the SCO provide opportunities to address some of the obstacles to further expansion.

But the central task is not merely to reach a headline trade figure.

It is to build a partnership in which energy security supports industrial development, fertiliser supplies strengthen agricultural production, Indian manufacturers gain reliable access to Russian consumers, and investment creates productive capacity in both countries.

The historical relationship shows that economic cooperation can help build industries and capabilities. The modern challenge is to apply that lesson to a more competitive, interconnected and financially complex world.

India–Russia trade will be more resilient when its foundation extends beyond commodities to include manufacturing, technology, agriculture, services, investment and dependable payment systems. That is the opportunity and the test for the next phase of the partnership.

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