Russia features prominently in India’s smart strategy of trade diversification and not only is it buying a hefty volume of oil but there’re now talks of a major defence pact. India is in discussions with Russia for a Rs 10,000 crore deal to procure missiles for its S-400 ‘Sudarshan’ air defence systems.
Having successfully used the system in Operation Sindoor to bring down 6-7 Pakistan fighter and spy planes, the Indian Air Force is keen to acquire a significant number of missiles to strengthen its air defence capabilities.
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Defence sources told ANI that the proposal is expected to be taken up at a defence acquisition council meeting on October 23.
At the same time, non-energy exports from India to Russia have been steadily rising, reflecting a deliberate effort to reduce dependence on any single market or commodity. This push comes at a time when US policies aim to restrict certain energy transactions with Russia, prompting India to explore alternative channels to secure supplies and sustain trade momentum.
US President Trump claimed that Prime Minister Modi promised to scale back Russian oil purchases. Speaking at a Diwali event, Trump said Modi “is not going to buy much oil from Russia” and insisted they share the goal of ending the war in Ukraine. Modi acknowledged Trump’s greetings on social media but offered no confirmation of the alleged commitment.
Rising India-Russia trade
Trade between India and Russia has been on a steady rise, even as the balance remains tilted toward energy imports. Nearly 90% of what India buys from Russia comes in the form of mineral fuels — crude oil, coal, and related products — making it one of the cornerstones of their economic partnership.
According to The Economic Times, mineral fuels, oils, and mineral waxes accounted for 54.2% of India’s total imports in FY24, rising slightly to 56.9% in FY25. Other categories showed mixed movements.
The share of animal and vegetable fats and oils increased from 1.3% to 2.4%, while fertilisers slipped from 2.1% to 1.8%.
Project goods, used for specific industrial or infrastructure purposes, declined from 0.8% to 0.6%, and pearls, precious and semi-precious stones dropped from 1.2% to 0.4%.
This heavy dependence on energy highlights Russia’s strategic importance for India’s energy security. However, New Delhi is also working to rebalance this trade equation by expanding its export basket.
The goal is to move beyond the traditional pillars of machinery, pharmaceuticals, and chemicals, and push a wider range of products, from agricultural goods to processed foods and manufactured items.
Diversifying exports
India’s exports to Russia are steadily widening in scope, reflecting a clear push to move beyond traditional sectors. Over the past year, growth has been visible across multiple categories, from heavy industry to high-value manufacturing.
Exports of nuclear reactors, boilers, machinery, and mechanical appliances rose from $0.65 million in FY24 to $1.14 million in FY25.
Pharmaceutical products increased from $0.39 million to $0.42 million, organic chemicals from $0.34 million to $0.37 million, electrical machinery and parts from $0.35 million to $0.36 million, and inorganic chemicals from $0.21 million to $0.24 million.
Agricultural and marine products, which have traditionally played a smaller role in India–Russia trade, are now gaining momentum.
For the April–August period of FY26, exports saw a sharp uptick: marine goods from $58.2 million to $72.7 million, fresh vegetables from $2.6 million to $5.0 million, and fresh fruits from $6.6 million to $7.3 million.
Processed vegetables jumped from $12.2 million to $17.1 million, while processed fruits and juices edged up from $17.3 million to $17.7 million. The only exception is spices, which saw a dip slightly from $13.0 million to $12.7 million.
What this shows is a gradual but meaningful shift in India’s trade approach. The country isn’t just doubling down on its existing strengths, it’s actively broadening its export base to reduce dependence on a few dominant markets and ensure more stable growth in the long run.
Trump tariff shock
The context for India’s diversification push is in part shaped by the United States’ imposition of sweeping 50% tariffs on a broad basket of Indian exports. These tariffs targeted more than 60% of Indian exports to the US, including key labour-intensive sectors such as textiles, gems and jewellery, marine products, and leather goods, while pharmaceuticals and electronics remained largely exempt.
The Global Trade Research Initiative (GTRI) reported a sharp 37.5% decline in Indian exports to the US over four months, from $8.8 billion in May 2025 to $5.5 billion in September 2025, the steepest and most sustained drop of the year.
Despite this, India’s broader trade performance has shown resilience. According to the IMF’s October 2025 World Economic Outlook (WEO), India’s GDP is projected to grow 6.6% in FY26, up from 6.5% in FY25, before moderating slightly to 6.2% in FY27. Domestic momentum and continued economic expansion are providing a buffer against external shocks.
Trade diversification showing early results
India’s exporters are learning to adapt fast. A new report from Elara Capital shows how, despite the steep 50% tariff imposed by the US, India’s overall export engine hasn’t stalled. In fact, exports grew 6.7% year-on-year in September 2025, driven mainly by electronics, engineering goods, and marine products.
The bigger picture looks even more interesting. During the July–September quarter (Q2 FY26), exports climbed 9% compared to the same period last year, a sharp turnaround from the 7% fall seen in Q2 FY25. Imports also ticked up 4% quarter-on-quarter, showing that trade activity overall is gaining pace.
Across the first half of FY26, India’s merchandise trade deficit widened slightly to $155 billion from $145 billion a year earlier. Exports stood at $220 billion, up 3% year-on-year, while imports rose 4.5% to $375 billion.
So what’s driving this recovery? A mix of advance orders and strategic diversification. Indian exporters have been spreading their markets more evenly across regions — shipping more goods to countries like Spain, the UAE, China, and Bangladesh. These newer or expanded routes are helping offset losses from tariff-hit markets like the US.
And the results show. Electronics exports jumped an impressive 50.5% year-on-year. Rice exports surged 33.2% to $924.8 million. Marine products rose 23.4% to $781 million. Even gems and jewellery — a traditionally volatile segment — managed a small but steady 0.4% rise in September, bringing growth for the first half of the fiscal year to about 1.8%.
That said, not every sector is out of the woods. Labour-intensive industries such as readymade garments, cotton textiles, and handloom products continue to struggle. Exports in these categories dropped 10.1% and 11.7% year-on-year, respectively, as smaller manufacturers find it harder to absorb tariff shocks or quickly pivot to new markets.
The takeaway is clear: India’s exporters are becoming more agile, using diversification as a shield against global trade disruptions. But the uneven recovery also shows how deeply tariff measures and global demand swings still shape who wins and who falls behind, in the export race.
Expanding into new markets
India’s export story this year isn’t just about its growing trade with Russia — it’s far broader. Official data reported by PTI shows that as many as 24 countries, including South Korea, the UAE, Germany, Egypt, Vietnam, Iraq, Mexico, Russia, Kenya, Nigeria, Canada, Poland, Sri Lanka, Oman, Thailand, Bangladesh, Brazil, Belgium, Italy, and Tanzania, recorded positive export growth between April and September 2025–26.
Together, shipments to these countries were worth $129.3 billion, nearly 59% of India’s total exports for the first half of the fiscal year. What this indicates is that India’s export growth is becoming more geographically diverse, not tied to a single market or region.
Overall, during April–September 2025, exports rose 3.02% to $220.12 billion, while imports increased 4.53% to $375.11 billion. That left a trade deficit of about $155 billion, according to the Commerce Ministry.
But not all destinations tell the same story. Exports to 16 countries, together accounting for $60.3 billion, or roughly 27% of India’s total exports, declined during the same period. The US, in particular, has been a weak spot. Shipments to America fell by nearly 12% in September, down to $5.46 billion, mainly because of Washington’s sweeping 50% tariff on Indian goods.
Yet, exporters aren’t sitting still. Many are shifting focus to new and emerging markets across Africa, Latin America, and the Middle East to make up for the lost ground. “The trend will continue in the coming months as well,” an exporter told PTI, noting that companies are treating these regions as long-term opportunities rather than stopgap options.
Energy and defence
India’s engagement with Russia goes beyond trade.
Defence cooperation remains strong, with plans to acquire missiles worth ₹10,000 crore for the S-400 air defence system. Defence sources told ANI, “The Indian Air Force is looking to buy the missiles in significant numbers to further bolster its air defence capabilities. The discussions with the Russian side are already on in this regard.”
The S-400 system has already been deployed operationally, reportedly downing multiple Pakistani aircraft during Operation Sindoor. India is negotiating for the remaining two of five squadrons, while three have already been inducted.
Discussions are also underway on S-500 systems and enhancements to BrahMos supersonic cruise missiles. Russian President Vladimir Putin is scheduled to visit India in December to discuss further military collaboration.
On energy, US President Trump publicly asserted that Modi assured him India would wind down Russian oil purchases. Speaking at a Diwali event, Trump said, “He’s not going to buy much oil from Russia. He wants to see that war end as much as I do. He wants to see the war end with Russia, Ukraine, and as you know, they’re not going to be buying too much oil.” Modi acknowledged Trump’s Diwali greetings on social media but did not confirm the call’s content.
Trump’s tariffs, while initially disruptive, have pushed India to rethink its trade strategy. Diversification into new markets and sectors, coupled with strengthened strategic ties with Russia, offers a blueprint for resilience. But risks persist: tariffs could become permanent or expand, new markets bring logistical and regulatory challenges, and over-reliance on sectors like electronics exposes India to concentration risk.