Sanctions, logistics issues take a toll on India's exports to Russia

Oil imports drive surge; engineering exports dip as sanctions, logistics, and market access hamper outbound growth

Even as India’s merchandise trade with Russia expanded sharply since the onset of the conflict with Ukraine in February 2022, export growth remained in the slow lane owing to sanctions pressure, disruption in logistics and market access issues. 

Total trade between India and Russia rose from $8.73 billion in FY22 to $68.7 billion in FY25, mainly due to New Delhi’s oil purchases, government data showed. 

Inbound shipments rose from $5.48 billion in FY22 to $63.8 billion in FY25, while exports grew from $3.5 billion to only $4.88 billion, according to commerce department data. 

Exporters said that, going ahead, exports to Russia may see growth, but in a limited way. This comes as Western nations have been trying to isolate Russia through economic sanctions. 

Logistics challenges persist due to inadequate container load, and currency fluctuation — mainly in ruble. This has also made purchase of Indian goods more expensive. 

India’s key exports to Russia include engineering goods, drugs and pharmaceuticals, electronics, organic and inorganic chemicals, coal and marine products, among others. 

In certain sectors such as dairy, ma­r­ine products and pharmaceuticals, ma­rket access remains an issue, they said.  

However, in the current financial year (April-October), marine exports have grown by nearly 30 per cent year-on-year (Y-o-Y) — although at a low base — to $90.79 million. 

That apart, the US government’s warning to Indian manufacturers last year — urging them to ensure that items, including defence equipment, are not exported to Russia — has dampened sentiment. 

Companies have been hesitant to export items that are dual-use in nature, given the risk that such items could aid Russia’s missile systems. This could expose them to Western sanctions. 

“The bigger companies that have exposure to the US are hesitant to export to Russia. Any change in the geopolitical situation will improve exports to Russia,” Engineering Export Promotion Council of India chairman Pankaj Chadha said. 

Sanctions and geopolitical challenges have been the reasons for a fall in exports of engineering goods to Russia. This comes even as the segment accounts for the largest share of India-outbound shipments to that market. Exports of engineering goods declined to $1.26 billion in FY25 from $1.36 billion in FY24. 

 

Federation of Indian Export Organisations (Fieo) also echoed Chadha’s sentiment. “After the sanctions, large companies are not keen to deal with Russia and most exports are from small and medium companies. As a result, quantum growth in exports will be difficult,” said Ajay Sahai, director general and CEO, Fieo. However, in some segments, we are doing well such as electrical and electronics. We have done well and have crossed the $1 billion mark (in FY25). “Coffee, food products, home textiles and auto components demand is growing,” he said. 

All eyes are now on the upcoming visit of Russian President Vladimir Putin to India later this week.