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11 Mar, 2010 11:30

Russia – India PM’s talk on boosting private slice of trade pie

Prime Minister Putin’s New Delhi visit comes as Russia and India are looking to double bilateral trade, and boost the private sector's role in it.

The Indian telecom market is one of the fastest growing in the world, with 500 million cell-phone users. But an operator from Russia has turned it upside down with aggressive pricing and innovative per-second tariffs. In just over a year, a joint venture between Russian company Sistema and India's Shyam Group, has reached 3 million customers and is growing at 15 % every month. Sergey Cheremin, Deputy Chairman at Sistema, says this is mostly due to a lower cost advantage.

“As we are a newcomer and we are more aggressive – we have to be a little bit more
aggressive than the existing players – and CDMA network allows us to spend less on CAPEX on same quality network. So that gives us the possibility to play on prices and services.”

Despite this, much of the trade between Russia and India is in government to government contracts, particularly in the defence sector. Russia is India’s largest arms supplier and during his visit, Prime Minister Putin is expected to sign defence deals worth $44 billion, to supply fighter planes to the Indian Navy, and to jointly develop a new-generation fighter aircraft.

According to Rajiv Sikri, Secretary of India’s Ministry of External Affairs from 2004 – 2006, Russia has long been a reliable partner in the sphere since Soviet era.

“We got from the Soviet Union and later from Russia, and we continue to get, a lot of technology, transfer of technology, which is simply unavailable to us from other sources. That’s very important. And our people have very good experience of using Soviet equipment, and they’re very happy with it. It’s reliable.”

Russia is also a big partner in India’s nuclear power sector, helping build civilian nuclear power plants to feed its growing energy demands. Prime Minister Manmohan Singh is likely to ask Russia for nuclear reprocessing technology, which the US remains hesitant about transferring to India.

With this being Putin’s fifth visit to India in the last decade, its clear that both sides will use the opportunity to reaffirm their partnership, with Rajiv Sikri stressing that such meetings help to build fruitful cooperation based on a mutual understanding.

“If there is trust and confidence and understanding at the highest levels, then this filters down. That’s why you have summit meetings between states, because you renew the friendships, the understandings, remove the misunderstandings, and find new areas of cooperation."

However, while bilateral trade is likely to touch $10 billion this year, it is nowhere near the potential given the size of both economies. Unlike India’s thriving, private-sector relationship with the US, the Indo-Russian relationship is almost entirely driven by the two governments. That is what Prime Ministers Putin and Singh will need to discuss, on how to involve the private sector of their countries more in this partnership.