India and the Eurasian Economic Union (EAEU) have made significant strides in deepening their economic partnership, with the recent signing of the Terms of Reference (ToR) to launch negotiations on a Free Trade Agreement (FTA). This move comes at a time when India seeks to diversify its trade relationships in the face of rising US tariff threats and stalled trade talks with the United States.
The Eurasian Economic Union (EAEU) is a regional economic organization aimed at fostering economic integration among its member states.
Established: The EAEU was formed through the Treaty on the Eurasian Economic Union in 2015, with the goal of creating a single market for goods, services, capital, and labor.
Armenia
Belarus
Kazakhstan
Kyrgyzstan
Russia (the largest and most influential member)
Headquarters: Moscow, Russia.
Ensure free movement of goods, services, labor, and capital.
Promote coordinated economic policies across member states.
Enhance the competitiveness of member economies and ensure their sustainable development.
The EAEU's market is valued at USD 6.5 trillion. By negotiating an FTA, India would gain preferential access to this vast market, especially in sectors like textiles, pharmaceuticals, engineering goods, and electronics.
Micro, Small, and Medium Enterprises (MSMEs) in India stand to benefit from expanded market access, potentially boosting exports in a diversified portfolio of goods.
The India-EAEU FTA would help India reduce dependency on traditional markets like the US and EU, especially in the context of rising trade disputes and tariff threats.
With bilateral trade between India and the EAEU expected to reach USD 69 billion in 2024 (a 7% increase from 2023), the partnership has the potential for substantial growth.
The EAEU (especially Russia) is a major supplier of natural resources, including crude oil, natural gas, and metals—critical for India’s energy and industrial needs.
Russia already supplies 35-40% of India’s crude oil imports, and securing long-term cooperation through the EAEU will further bolster India’s energy security.
The EAEU partnership complements India’s ongoing projects like the International North-South Transport Corridor (INSTC) and the Chennai–Vladivostok Corridor, which aim to reduce logistics costs and transit times between India and EAEU nations.
Improved connectivity can enhance trade efficiency and open up new avenues for economic cooperation, especially in transportation and logistics.
India’s trade deficit with Russia has surged significantly—from USD 6.6 billion in 2021 to USD 58.9 billion in 2024–25, largely due to hydrocarbon imports.
Energy imports continue to dominate, which may hinder India’s goal of balanced trade with the region.
A trade deal led by Russia may raise concerns in NATO and among Western allies, requiring India to balance its strategic interests with its geopolitical stance.
Sanctions against Russia (due to the Ukraine conflict) pose a challenge, especially as increasing trade with Russia may risk further US and EU sanctions against India. India must also carefully manage its engagement with the US amid 50% tariffs on Indian goods.
Cheap imports from Russia and other EAEU countries, especially in oil, metals, and minerals, could potentially undermine India’s domestic industries.
The Indian government may need to consider safeguards or quotas for sectors that are vulnerable to dumping or disruptive competition from these imports.
India’s FTA utilization rate remains low at around 25%, much lower than the 70-80% rate seen in developed countries.
India needs to address the underuse of its existing trade agreements to ensure that future FTAs with the EAEU are fully leveraged.
Despite the FTA, non-tariff barriers such as bureaucratic delays, customs procedures, and complex regulations remain significant hurdles to the free flow of goods and services.
Addressing these trade facilitation issues is critical to ensuring that the benefits of the FTA are realized.
Indian agricultural exports face difficulties due to strict sanitary and phytosanitary (SPS) standards in EAEU countries, which make market entry challenging.
Ensuring that Indian products meet SPS standards will be key to expanding agricultural exports to the EAEU.
Trade between India and the EAEU largely relies on the US dollar, leading to exchange rate risks and uncertainties.
While there are ongoing efforts to use the rupee-ruble mechanism, there is limited liquidity and cross-border payment infrastructure, especially with the backdrop of Russian sanctions.
Finalize and implement the Program of Economic Cooperation with Russia and extend it to all EAEU members. This will enhance cooperation in key sectors such as energy, agriculture, industry, education, and culture, fostering deeper ties.
India should aim to diversify its exports beyond hydrocarbons to include sectors like pharmaceuticals, agriculture, textiles, machinery, and services.
Expanding into these areas will reduce India’s dependence on hydrocarbons and strengthen its economic relationship with the EAEU.
Scaling up the use of local currencies (Indian rupee, Russian ruble) can help reduce dependency on the US dollar and mitigate currency risks.
India should work with the EAEU to develop and standardize Local Currency Settlement (LCS) frameworks, ensuring sufficient liquidity to facilitate seamless trade.
India should engage more actively with multilateral economic groupings like BRICS and revive regional platforms such as RIC (Russia–India–China).
Diversifying supply chains and expanding India’s network of trade alliances will bolster its resilience in a rapidly changing global trade environment.
Enhancing logistics infrastructure is crucial. India should focus on improving connectivity through initiatives like the INSTC, the Northern Sea Route, and the Chennai–Vladivostok Corridor to reduce transit times and costs.
Integrated transportation networks would enhance trade flow and foster better economic cooperation with EAEU nations.
India’s engagement with the Eurasian Economic Union (EAEU) presents both opportunities and challenges. An FTA with the EAEU offers significant potential for market access, trade diversification, and energy security. However, India must address several challenges, including its trade deficit with Russia, geopolitical sensitivities, and domestic industry concerns. By implementing strategic measures such as innovative financial mechanisms, diversifying exports, and strengthening multilateral partnerships, India can deepen its economic ties with the EAEU and enhance its position in global trade
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In every Lecture. Director Sir will provide conceptual understanding with around 800 Mindmaps.
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