755 russia

1
A
GLOBAL / COUNTRY STUDY AND REPORT
ON
RUSSIA
SUBMITTED TO
Gujarat Technological University
In Partial Fulfillment of the
Requirement of the Award for the Degree of
Master of Business Administration
Under the Faculty Guide:
Mr. Sunil Prajapati, MS. Selvy Palmer and Ms. Sashikala
Munka
Submitted by:
Enrollment No. 107550592062 to 107550592121
MBA SEMESTER -IV
Sardar Patel College of Administration & Management (SPCAM-MBA)
Approved by All India Council for Technical Education (AICTE), New Delhi
AFFILIATED WITH GUJARAT TECHNOLOGICAL UNIVERSITY,
AHMEDABAD
SPEC Campus, Vidhyanagar-Vadtal Road Bakrol-388315, Anand (Gujarat)
May, 2012

2
STUDENTS DECLARATION
We enrollment no. 107550592062 to 107550592121 Students of SARDAR PATEL COLLEGE
OF ADMINISTRATION & MANAGEMENT (SPCAM-MBA) Bakrol,, hereby declare that the
report for A GLOBAL / COUNTRY STUDY REPORT ON Spain is a result of our own work
and our indebtedness to other work publications, references, if any, have been duly
acknowledged.
Place : .. Date :

3
PREFACE
In today’s competitive environment, survival of the fittest is the new motto. That is why it’s
necessary that the theoretical knowledge is accompanied by practical knowledge. In an MBA
programmer, project study forms an important and an integral part. It helps in bridging the gap
between the two main important aspects the theoretical as well practical knowledge.
“Knowledge and Human Power are synonyms”, once said the great philosopher Francis Bacon.
However based on the experience within today’s global markets, he would probably say, “The
ability to capture, communicate & leverage knowledge to solve problems is human power”. This
raises the question how exactly one can best capture, communicate & leverage knowledge,
especially within world of system engineering.
With the help of the county report we can get the information about the both country and the
position of the both country and make compare both the country so we can say that which
country is good and which country are linked with which country.
So the country report is also helpful to show the country’s economy and all the rank like GDP
and all that. With help of the country we get the information about the import and export of that
country with other country and which things are more import and export form the country.

4
ACKNOWLEDGEMENT
We have the pleasure to present herewith the study work on economic policy of Argentina.
Working on this project has been a great learning experience. Numerous individuals helped us a
lot with all sort of queries that we had and without the help of them, we would never be able to
complete this Country Project. We would like to use this opportunity to thank them.
We are extremely indebted to our guides (Mr. Sunil Prajapati, MS. Selvy Palmer and Ms.
Sashikala Munka) who have taken great pains to provide us guidance to make this project. She is
always there to help us a lot by giving her valuable guidelines and suggestions to complete this
study from start to end. She is the person who inspired us to explore such an emerging sector of
economy. She inspired us to be systematic in our work. She explained that how to go ahead for
studying such topic and also explained the technical and other dimensions of the same. We want
to thank our Director General-SPEC, Dr. T. D. Tiwari for giving us an opportunity to work
on this task.
Lastly, we express our gratitude to the faculty of SPCAM and want to thanks GTU for giving us
a chance to work on such practical task. We are aware that there are a number of people who
have helped us to do this project but we may have failed to make a mention of them. We take
this opportunity to express our sincere gratitude to all those for their assistance and support.
Thanking All,

5
Table of Content
Sr. No Particular Total No. of Pages Semester
Part-I Economic Overview of the
Selected Country
9-28 III
1  Demographic profile of
Spain
 Economic Overview of
Spain
 Overview of different sector
 Overview of Business and
Trade at International Level
 Present trade relation and
business volume of different
product with India
III
Part II PART – II INDUSTRY /
SECTOR / COMPANY SPECIFIC
STUDY
29-198 IV
2  Banking Sector in Spain
 Retail Sector in Spain
 Information Technology
Sector in Spain
 Logistic Sector in Spain
 Import and Export in Spain
 Media and Advertisement
sector in Spain
 Rural Sector in Spain
 Transportation Sector in
Spain
IV
3 Conclusion 199-204 IV
4 Bibliography 205-208 IV

6
List of Table
Table.
No
Particular Pages No.
1 Major food retailers operating in Russia 46
2 Food retailers operation in India 47
3 Food & beverage production in Russia and India 50`
4 Production of wheat in Russia and India 51
5 Contribution in GDP by the agriculture sector 51
6 Food production and nutrition 52
7 The history of information systems in business 70
8 The BPO growth 84
9 Software export growth 85
10 Comparative position of logistic industry 92
11 Logistic comparison 93
12 Overall comparison 94
13 Traditional fulfillment versus e-fulfillment of Russia 98
14 Description of border control in the Russia
federation
100
15 Russia state bodies in the border control process 102
16 Estimate of business space in logistic sector of India 103
17 Russian- Indian trade turnover in 2006-2011 109
18 India export (2006-07) 116
19 Advertising as country a percent of GDP 120
20 Growth of Indian advertising industry in 2006-2010 127
21 Forecaste growth of various segment of the media 128

7
industry in India till 2010
22 Russia’s trade indicators at a 2010 130
23 Russian foreign trade in good 137
24 India-Russia Trade data 140
25 Rural population of Russia 149
26 Railways, passengers carried 173
27 Railways, Goods transported 174
28 International tourism, expenditure for passenger
transport
175
29 Motor vehicle per 1000 people 175
30 The past review of the pharma sector 182

8
List of Graph
Graph. No Particular Pages No.
1 Comparative position of banking sector with
India
34
2 Stock market comparatives 35
3 Structure of logistic industry 91
4 Logistic performance index 92
5 Customs 92
6 Infrastructure 92
7 International shipments 92
8 Logistic competence 93
9 Tracking and tracing 93
10 Timelines 93
11 Growth rate by segment in Russia and
worldwide, 2011-15
135
12 Russian Foreign trade in good 138
13 Russia’s Agricultural output 151
14 Distribution of major non-agricultural
establishment in rural India during 2005
160

10
DEMOGRAPHIC PROFILE OF RUSSIA
Population
138,739,892 (July 2011 est.)
Geography
Area: 17 million sq. km. (6.5 million sq. mi.); about 1.8 times the size of the United States.
Cities: Capital--Moscow (pop. 10.4 million). Other cities--St. Petersburg (4.6 million),
Novosibirsk (1.4 million), Nizhniy Novgorod (1.3 million).
Terrain: Broad plain with low hills west of Urals; vast coniferous forest and tundra in Siberia;
uplands and mountains (Caucasus range) along southern borders.
Climate: Northern continental.
Age structure
0-14 years: 15.2% (male 10,818,203/female 10,256,611)
15-64 years: 71.8% (male 47,480,851/female 52,113,279)
65 years and over: 13% (male 5,456,639/female 12,614,309) (2011 est.)
Median age
total: 38.7 years
male: 35.5 years
female: 41.9 years (2011 est.)
Population growth rate

11
-0.47% (2011 est.)
Birth rate
11.05 births/1,000 population (2011 est.)
Death rate
16.04 deaths/1,000 population (July 2011 est.)
Net migration rate
0.29 migrant(s)/1,000 population (2011 est.)
Urbanization
urban population: 73% of total population (2010)
rate of urbanization: -0.2% annual rate of change (2010-15 est.)
Sex ratio
at birth: 1.06 male(s)/female
under 15 years: 1.06 male(s)/female
15-64 years: 0.92 male(s)/female
65 years and over: 0.44 male(s)/female
total population: 0.85 male(s)/female (2011 est.)
Infant mortality rate
total: 10.08 deaths/1,000 live births
male: 11.58 deaths/1,000 live births
female: 8.49 deaths/1,000 live births (2011 est.)
Life expectancy at birth
total population: 66.29 years
male: 59.8 years
female: 73.17 years (2011 est.)

12
Total fertility rate
1.42 children born/woman (2011 est.)
HIV/AIDS - adult prevalence rate
1% (2009 est.)
HIV/AIDS - people living with HIV/AIDS
980,000 (2009 est.)
HIV/AIDS - deaths
NA
Major infectious diseases
degree of risk: intermediate
food or waterborne diseases: bacterial diarrhea
Vector borne disease: tick-borne encephalitis
Note: highly pathogenic H5N1 avian influenza has been identified in this country; it poses a
negligible risk with extremely rare cases possible among US citizens who have close contact
with birds (2009)
Nationality
noun: Russian(s)
adjective: Russian
Ethnic groups
Russian 79.8%, Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%, Chuvash 1.1%, other or unspecified
12.1% (2002 census)
Religions
Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2% (2006 est.)
Note: estimates are of practicing worshipers; Russia has large populations of non-practicing
believers and non-believers, a legacy of over seven decades of Soviet rule
Languages
Russian (official), many minority languages
Literacy

13
definition: age 15 and over can read and write
total population: 99.4%
male: 99.7%
female: 99.2% (2002 census)
School life expectancy (primary to tertiary education)
total: 14 years
male: 14 years
female: 15 years (2008)
Education expenditures
3.9% of GDP (2006)
Maternal mortality rate
39 deaths/100,000 live births (2008)
Health expenditures
5.4% of GDP (2009)
Physicians density
4.3089 physicians/1,000 population (2006)
Hospital bed density
9.66 beds/1,000 population (2006)
Economic Overview of Russia
Economic Overview
Russia has undergone significant changes since the collapse of the Soviet Union, moving from a
globally-isolated, centrally-planned economy to a more market-based and globally-integrated
economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in
the energy and defense-related sectors. The protection of property rights is still weak and the
private sector remains subject to heavy state interference. Russian industry is primarily split
between globally-competitive commodity producers - in 2009 Russia was the world's largest

14
exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel
and primary aluminum - and other less competitive heavy industries that remain dependent on
the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to
boom and bust cycles that follow the highly volatile swings in global commodity prices. The
government since 2007 has embarked on an ambitious program to reduce this dependency and
build up the country's high technology sectors, but with few results so far. The economy had
averaged 7% growth since the 1998 Russian financial crisis, resulting in a doubling of real
disposable incomes and the emergence of a middle class. The Russian economy, however, was
one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the
foreign credits that Russian banks and firms relied on dried up. The Central Bank of Russia spent
one-third of its $600 billion international reserves, the world's third largest, in late 2008 to slow
the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to
increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign
debts coming due. The economic decline bottomed out in mid-2009 and the economy began to
grow in the first quarter of 2010. However, a severe drought and fires in central Russia reduced
agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in
other sectors such as manufacturing and retail trade. Russia's long-term challenges include a
shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-
energy companies, and poor infrastructure in need of large investments.
GDP (purchasing power parity):
$2.23 trillion (2010 est.)
GDP (official exchange rate):
$1.46 trillion (2010 est.)
GDP - real growth rate:
4% (2010 est.)
GDP - per capita (PPP):
$15,900 (2010 est.)
GDP - composition by sector :
services: 59.1% (2010 est.)
Labor force:
75.49 million (2010 est.)

15
country comparison to the world: 7
Unemployment rate:
7.96% (2010 est.)
Population below poverty line:
13.1% (2009)
Investment (gross fixed):
21.9% of GDP (2010 est.)
Budget:
revenues: $262 billion
expenditures: $341.1 billion (2010 est.)
Taxes and other revenues:
17.9% of GDP (2010 est.)
Budget surplus (+) or deficit (-):
-5.4% of GDP (2010 est.)
Public debt:
9% of GDP (2010 est.)
Inflation rate (consumer prices):
6.9% (2010 est.)
Exports:
$400.1 billion (2010 est.)
Imports:
$248.7 billion (2010 est.)

16
Meaning of trade and commerce
COMMERCE: Commerce refers to all those activities which help directly or
indirectly in the distribution of goods to the ultimate consumer.
TRADE: The action of buying and selling goods and services.
OVERVIEW
Russia's overall trade surplus in 2009 was $112 billion--compared with $180
billion in 2008 and $129 billion in 2007. In 2010 the trade surplus increased to
$152 billion and continued to grow in 2011 to reach $118 billion by July 2011
(versus $96.4 billion at the same time in 2010), although import growth was
beginning to outpace export growth. World prices continue to have a major effect
on export performance, since commodities--particularly oil, natural gas, metals,
and timber--comprise nearly 90% of Russian exports. Russian GDP growth and the
Stock of direct foreign investment – at home:
$297.4 billion (31 December 2010 est.)
Stock of direct foreign investment - abroad:
$274.6 billion (31 December 2010 est.)

17
surplus/deficit in the Russian Federation state budget are closely linked to world
oil prices.
Statistics
GDP: $1.465 trillion (2010) (nominal; 10th)
$2.222 trillion (2010) (PPP; 6th)
GDP growth: 4.9% (2011 est.)
GDP by sector: agriculture: (4%), industry (36.8%), services (59.1%)
(2010 est.)
Average net salary: 700 $, monthly (2010)
Main industries:
complete range of mining and extractive industries producing coal, oil, gas,
chemicals, and metals; all forms of machine building from rolling mills to high-
performance aircraft and space vehicles; defense industries including radar, missile
production, and advanced electronic components, shipbuilding; road and rail
transportation equipment; communications equipment; agricultural machinery,
tractors, and construction equipment; electric power generating and transmitting
equipment; medical and scientific instruments; consumer durables, textiles,
foodstuffs, handicrafts
Ease of Doing Business Rank: 123rd
Exports: $376.7 billion (2010 est.)
Export goods :
petroleum and petroleum products, natural gas, metals, wood and wood
products, chemicals, and a wide variety of civilian and military manufactures
Main export partners:
Netherlands 10.62%, Italy 6.46%, Germany 6.24%,
China 5.69%, Turkey 4.3%, Ukraine 4.01% (2009)
Imports $237.3 billion (2010 est.)

18
Import goods:
machinery, vehicles, pharmaceutical products, plastic,
semi-finished metal products, meat, fruits and nuts,
optical and medical instruments, iron, steel
Main import partners:
Germany 14.39%, China 13.98%, Ukraine 5.48%, Italy 4.84%, US 4.46% (2009)
Gross external debt: $471.6 billion (2010 est.)
Oil production
10.12 million bbl/day (2009) - country comparison to the world: 1

19
Public finances
Public debt: 9.5% of GDP (2010 est.)
Revenues: $202.7 billion (2009 est.)
Expenses: $301.4 billion (2009 est.) Foreign reserves:
US$502.496 billion (April 2011)
Overview of Different Economic Sectors in Russia
Industry
Russia's industrial growth per year (%), 1992–2010
Russia is one of the most industrialized of the former Soviet republics. In the 2000s,
Russia's industry, due to increasing demand and improved state finances, emerged from a deep

20
crisis caused by the dissolution of the Soviet Union. However, years of low investment continue
to leave their mark on the industry's capabilities and a lot of its equipment is in need of
modernization.
Besides its resource-based industries, Russia has developed large manufacturing
capacities, notably in machinery. The defense and aircraft industries are important employers and
are able to offer internationally competitive products for export.
Defense industry
Russia's defense industry employs 2.5 – 3 million people, accounting for 20% of all
manufacturing jobs. Russia is the world's second largest conventional arms exporter after the
United States. The most popular types of weaponry bought from Russia are Sukhoi and MiG
fighters, air defense systems, helicopters, battle tanks, armored personnel carriers and infantry
fighting vehicles. The research organization Centre for Analysis of Strategies and Technologies
ranked the air defense system producer Almaz-Antey as the industry's most successful company
in 2007, followed by aircraft-maker Sukhoi. Almaz-Antey's revenue that year was $3.122 billion,
and it had a work force of 81,857 people.
Aircraft industry
Aircraft manufacturing is an important industry sector in Russia, employing around
355,300 people. The Russian aircraft industry offers a portfolio of internationally competitive
military aircraft such as MiG-29 and Su-30, while new projects such as the Sukhoi Super jet 100
are hoped to revive the fortunes of the civilian aircraft segment. In 2009, companies belonging to
the United Aircraft Corporation delivered 95 new fixed-wing aircraft to its customers, including
15 civilian models. In addition, the industry produced over 141 helicopters. It is one of the most
science-intensive hi-tech sectors and employs the largest number of skilled personnel. The
production and value of the military aircraft branch far outstrips other defense industry sectors,
and aircraft products make up more than half of the country's arms exports.
Space industry
Space industry of Russia consists of over 100 companies and employs 250,000 people.
The largest company of the industry is RKK Energia, the main manned space flight contractor.
Leading launch vehicle producers are Khrunichev and TsSKB Progress. Largest satellite
developer is Reshetnev Information Satellite Systems, while NPO Lavochkin is the main
developer of interplanetary probes.
Automotive industry
A Lada Kalina Super 1600, painted in khokhloma national ornaments. Lada is the brand
of AvtoVAZ, the largest Russian car manufacturer in the Russian automotive industry.
Automotive production is a significant industry in Russia, directly employing around
600,000 people or 0,7% of the country's total work force. In addition, the industry supports
around 2–3 million people in related industries. Russia was the world's 15th largest car producer
in 2010, and accounts for about 7% of the worldwide production. In 2009 the industry produced

21
595,807 light vehicles, down from 1,469,898 in 2008 due to the global financial crisis. The
largest companies are light vehicle producers AvtoVAZ and GAZ, while KAMAZ is the leading
heavy vehicle producer. 11 foreign carmakers have production operations or are constructing
plants in Russia.
Electronics
Russia is experiencing a re-growth of Electronics and Microelectronics, with the revival
of JCS Mikron. An example of a successful Russian consumer electronics company is
Telesystems, whose products are sold in over 20 countries.
Telecommunications
Russia's telecommunications industry is growing in size and maturity. As of 31
December 2007, there were an estimated 4,900,000 broadband lines in Russia. Over 72% of the
broadband lines were via cable modems and the rest via DSL.
In 2006, there were more than 300 BWA operator networks, accounting for 5% of market
share, with dial-up accounting for 30%, and Broadband Fixed Access accounting for the
remaining 65%. In December 2006, Tom Phillips, chief government and regulatory affairs
officer of the GSM Association stated:
"Russia has already achieved more than 100% mobile penetration thanks to the huge
popularity of wireless communications among Russians and the government's good work
in fostering a market driven mobile sector based on strong competition."
While there is a lot of interest in a national broadband network, as of January 2007 there
still wasn't one.
The financial crisis, which had already hit the country at the end of 2008, caused a sharp
reduction of the investments by the business sectors and a notable reduction of IT budget made
by government in 2008–2009. As a consequence, the IT market in Russia in 2009 declined by
more than 20% in ruble terms and by one third in euro terms. Among the particular segments, the
biggest share of the Russian IT market still belongs to hardware.

22
Agriculture
Russia comprises roughly three-quarters of the territory of the former Soviet Union.
Following the breakup of the Soviet Union in 1991 and after nearly ten years of decline, Russian
agriculture begun to show signs of improvement due to organizational and technological
modernization. Northern areas concentrate mainly on livestock, and the southern parts and
western Siberia produce grain. Restructuring of former state farms has been an extremely slow
process. The new land code passed by the Duma in 2002 should speed restructuring and attract
new domestic investment to Russian agriculture. Private farms and garden plots of individuals
account for over one-half of all agricultural production.
Trade
Russian current account due to trade surplus
In 1999, exports were up slightly, while imports slumped by 30.5%. As a consequence,
the trade surplus ballooned to $33.2 billion, more than double the previous year's level. In 2001,
the trend shifted, as exports declined while imports increased. World prices continue to have a
major effect on export performance, since commodities, particularly oil, natural gas, metals, and
timber comprise 80% of Russian exports. Ferrous metals exports suffered the most in 2001,
declining 7.5%. On the import side, steel and grains dropped by 11% and 61%, respectively.
Most analysts predicted that these trade trends would continue to some extent in 2002. In
the first quarter of 2002, import expenditures were up 12%, increased by goods and a rapid rise
of travel expenditure. The combination of import duties, a 20% value-added tax and excise taxes
on imported goods (especially automobiles, alcoholic beverages, and aircraft) and an import
licensing regime for alcohol still restrain demand for imports. Frequent and unpredictable
changes in customs regulations also have created problems for foreign and domestic traders and
investors. In March 2002, Russia placed a ban on poultry from the United States. In the first
quarter of 2002, exports were down 10% as falling income from goods exports was partly
compensated for by rising services exports, a trend since 2000. The trade surplus decreased to
$7 billion from well over $11 billion the same period last year.
Foreign trade rose 34% to $151.5 billion in the first half of 2005, mainly due to the
increase in oil and gas prices which now form 64% of all exports by value. Trade with CIS
countries is up 13.2% to $23.3 billion. Trade with the EU forms 52.9%, with the CIS 15.4%,
Eurasian Economic Community 7.8% and Asia-Pacific Economic Community 15.9%.
Russia is China’s eighth largest trade partner and China is now Russia’s fourth largest
trade partner.
China now has over 750 investment projects in Russia, involving $1.05 billion. China’s
contracted investment in Russia totaled $368 million during January–September 2005, twice that
in 2004.

23
Information technology
Russia has more academic graduates than any other country in Europe
The IT market is one of the most dynamic sectors of the Russian economy. Russian
software exports have risen from just $120 million in 2000 to $1.5 billion in 2006. Since the year
2000 the IT market has demonstrated growth rates of 30–40 percent a year, growing by 54% in
2006 alone. The biggest sector in terms of revenue is system and network integration, which
accounts for 28.3% of the total market revenues. Meanwhile the fastest growing segment of the
IT market is offshore programming. The industry of software development outsourcing crossed
the mark of $1 billion of total revenues in 2005 and reached $1.8 billion in 2006. Market analysts
predict this indicator to increase tenfold by 2010. Currently Russia controls 3 percent of the
offshore software development market and is the third leading country (after India and China)
among software exporters. Such growth of software outsourcing in Russia is caused by a number
of factors. One of them is the supporting role of the Russian Government. The Government has
launched a program promoting construction of IT-oriented technology parks (Technoparks) –
special zones that have an established infrastructure and enjoy a favorable tax and customs
regime, in seven different places around the country: Moscow, Novosibirsk, Nizhny Novgorod,
Kaluga, Tumen, Republic of Tatarstan and St. Peterburg Regions. Another factor stimulating the
IT sector growth in Russia is the presence of global technology corporations such as Intel,
Motorola, Sun Microsystems, Boeing, Nortel and others, which have intensified their software
development activities and opened their R&D centers in Russia.
Nanotechnology
In its push to diversify Russia's research and development in emerging technologies, The
Putin government has announced a massive $7 billion investment program in nanotechnology.
As part of the program, during 2007, $5 billion is being invested into a new state corporation,
Rosnanotech that will be responsible for overseeing and coordinating research in the area.
In criticism of the initiative, it has been noted that the Russian nanotech program will
receive three times more state funding than the rest of Russia's scientists put together.
Apart from public funding, Mikhail Prokhorov, a leading Russian metals and banking
tycoon, has announced the creation of a $17.5 billion holding company that will focus on high-
tech investments, including alternative energy and nanotechnology.
Construction market
Russian construction industry has survived its most difficult year for more than a decade.
The 0.8% reduction recorded by the industry for the first three quarters of 2010 looks remarkably
healthy in comparison with the 18.4% slump recorded last year, and construction firms are now
much more optimistic about the future than they were just a few months ago. The most
successful of them have concluded contracts worth billions of dollars and are planning to take on
employees and purchase new building machinery. The downturn served to emphasize the
importance of the government to the construction market.
Introduction

24
India-Russian relations refer to the bilateral relations between the Republic of India and the
Russian Federation. During the Cold War, India and the Soviet Union (USSR) enjoyed a strong
strategic, military, economic and diplomatic relationship. After the collapse of the USSR, Russia
inherited the close relationship with India.
India is the second largest market for the Russian defense industry. In 2004, more than 70% of
the Indian Military's hardware came from Russia, making Russia the chief supplier of defense
equipment. More recently, the defense relationship has been strained due to repeated price
growths by Russia over the sale of the aircraft carrier.
India has an embassy in Moscow and 2 Consulates-General (in Saint Petersburg and
Vladivostok). Russia has an embassy in New Delhi and 4 Consulates-General (in Chennai,
Hyderabad, Kolkata, Mumbai).
Military relations
The Prime Minister of India, in collaboration with External Affairs Ministry, handles key foreign
policy decisions. Shown here is the current Prime Minister, Manmohan Singh with the former
President of Russia, Vladimir Putin.
Defence relations between India and the Russian Federation have a historical perspective. The
Soviet Union was an important supplier of defence equipment for several decades, and that
relationship was inherited by Russia after the break-up of the Soviet Union. Today, the
cooperation is not limited to a buyer-seller relationship but includes joint research and
development, training, service to service contacts, including joint exercises. The last joint naval
exercises took place in April 2007 in the Sea of Japan and joint airborne exercises were held in
September 2007 in Russia.The last military exercise between Russian and Indian army units
were held in Uttarakhand in October 2010. However, the bilateral relations seem to be strained
with Russia cancelling both its 'Indra' series of military exercises with India for the year 2011.

25
Economic relations
Bilateral trade turnover is modest and stood at US$ 3 billion in 2006–07, of which Indian exports
to Russia were valued at US$ 908 million. The major Indian exports to Russia are
pharmaceuticals; tea, coffee and spices; apparel and clothing; edible preparations; and
engineering goods. Main Indian imports from Russia are iron and steel; fertilizers; non-ferrous
metals; paper products; coal, coke & briquettes; cereals; and rubber. Indo-Russian trade is
expected to reach US$10 billion by 2010.
In February 2006, India and Russia also set up a Joint Study Group to examine ways to increase
trade to US$ 10 billion by 2010 and to study feasibility of a Comprehensive Economic
Cooperation Agreement (CECA). The group finalized its report after its fourth meeting in
Moscow in July 2007. It has been agreed that a Joint Task Force would monitor the
implementation of the recommendation made in the Joint Study Group Report, including
considering CECA.
Cooperation in the Energy sector
Pratibha Patil with President of Russia Dmitry Medvedev in India on 5 December 2008.
Energy sector is an important area in Indo-Russian bilateral relations. In 2001, ONGC-Videsh
Limited acquired 20% stake in the Sakhalin-I oil and gas project in the Russian Federation, and
has invested about US $ 1.7 billion in the project. The Russian company Gazprom and Gas
Authority of India Ltd. have collaborated in joint development of a block in the Bay of Bengal.
Kudankulam Nuclear Power Project with two units of 1000 MW each is a good example of Indo-
Russian nuclear energy cooperation. Both sides have expressed interest in expanding cooperation
in the energy sector.
In December 2008, Russia and India signed an agreement to build civilian nuclear reactors in
India during a visit by the Russian president to New Delhi.

26
Space Cooperation
In November 2007, the two countries have signed an agreement on joint lunar exploration. These
space cooperation programmes are under implementation. Chandrayaan-2 is a joint lunar
exploration mission proposed by the Indian Space Research Organisation (ISRO) and the
Russian Federal Space Agency (RKA) and has a projected cost of 425 crore (US$90 million).
The mission, proposed to be launched in 2013 by a Geosynchronous Satellite Launch Vehicle
(GSLV) launch vehicle, includes a lunar orbiter and a rover made in India as well as one lander
built by Russia.
Science and Technology
The ongoing cooperation in the field of science & technology, under the Integrated Long-Term
Programme of cooperation (ILTP) is the largest cooperation programme in this sphere for both
India and Russia. ILTP is coordinated by the Department of Science and Technology from the
Indian side and by the Russian Academy of Sciences and Russian Ministry of Industry &
Science and Technology from the Russian side. Development of SARAS Duet aircraft,
semiconductor products, super computers, poly-vaccines, laser science and technology,
seismology, high-purity materials, software & IT and Ayurveda have been some of the priority
areas of co-operation under the ILTP. Under this programme, eight joint Indo- Russian centers
have been established to focus on joint research and development work. Two other Joint Centres
on Non-ferrous Metals and Accelerators and Lasers are being set up in India.
Cooperation in the sphere of Culture
India–Russia relations in the field of culture are historical. Five Chairs relating to Indology have
been established in Moscow, Saint Petersburg, Kazan and Vladivostok. Days of Russian Culture
were held in India in November 2003, in Delhi, Kolkata and Mumbai. "Days of Indian Culture"
in Russia were organized from September- October 2005 in Russia.
There is a Hindi Department, in the University of Moscow.

27
Business infrastructure
The Forum discussions is usually focused on ways to develop cooperation in oil and gas,
engineering, automobile manufacture, metallurgy, infrastructure, power generation, chemical
industry, telecommunications and information technologies, innovations and new technologies,
etc.
In 2008 the Council of Chief Executive Officers was set up with the mandate to develop a
roadmap for increasing partnership and cooperation between the two countries at business level.
Mr. Vladimir Evtushenkov, the Chairman of Board of Directors of AFK Sistema is the co-
chairman of the Council from the Russian side and Mr. Mukesh Ambani, Chairman of Reliance
Industries Ltd, – from the Indian side.
Growth of Russian-Indian trade
Trade and economic cooperation between Russia and India is developing dynamically. The
Federal Customs Service of Russia reported a 7,5% increase in Russian-Indian trade in 2009
from the 2008 figure to USD7.46 billion. In January-February 2010, it grew by 40%, with a 40%
increase in Russian exports and in imports.
In 2009, machinery and equipment accounted for 51% of total Russian exports to India and
amounted to US$3.03 billion; fertilizers for 13% (US$0.8 billion), ferrous metals and related
products for 9% (US$530 million).
Major import items in 2009 were pharmaceuticals (30%, US$464 million), machinery and
equipment, transport vehicles and instruments (18%, US$268 million), agricultural produce and
food (11%, US$165 million) and textiles (10%, US$156 million).
India manufactures a wide range of competitive machinery and equipment needed by Russia.
The low volume of Russian imports of the above products in previous years could be explained
by a lack of information about Indian producers.

28
Current situation: Investments and projects
Russian companies Silovye Mashiny (Power Machines) and Technopromexport provide
technical assistance and supply equipment for the construction of the Sipat thermal power plant
(TPP) in Chattisgarh (three power units of 660 MW each), the Barh TTP in Bihar (3 x 660 MW),
and the Obra TTP in Uttar Pradesh (5 x 200 MW). Recently, the construction of the Teri
hydropower plant in Uttranchal was completed (4 x 250 MW) with Russian assistance.
Russia’s AFK Sistema holding a controlling stake (74%) in the Indian telecommunications
company Sistema Shyam Telelink Ltd is building a mobile phone network under brand “MTS”.
Sistema is planning to invest up to US$7 billion in this project. The Pan-Indian telecom network
is to be commissioned in the coming years.
In 2010 a joint venture between Russia’s major truck manufacturer Kamaz and Vectra Group in
Hosur (Tamilnadu) started assembling Kamaz-6540 dump trucks with a gross weight of over 25
metric tons. It is planned that in three to four years 30% to 40% of all components for these
vehicles will be produced in India.
Russian heavy tractor manufacturer Promtractor is also setting up an assembling plant in India.
In February 2008, Bank VTB, a state-controlled foreign trade bank and one of the largest banks
in Russia, opened an operating branch in New Delhi. We expect that this year one more Russian
bank, the largest in Russia state-run savings bank Sberbank will also open its branch in India.
Russian-Indian company was set up in Orissa for the production of titanium products. It is
planned that the company will annually produce 40,000 metric tons of titanium dioxide, 132,000
metric tons of titanium tetrachloride, 10,000 metric tons of titanium sponge and 108,000 metric
tons of titaniferous slag. The project is partially financed from India’s rupee debt to Russia.
Russian companies participate in roads (Centrodorstroy) and gas pipelines (Stroytransgas)
construction projects. The consortia with Russian OJSC Transstroy is fighting for the Rs12,000
crore tender for construction of 71 km of Metro line in Hyderabad.

30
BANKING SECTOR OF RUSSIA
Introduction
Russian Banking System – the Current State and the Prospects for the Future
Developments
Banking market
The Russian banking sector has developed rapidly in recent years, reflecting the
strengthening Russian economy. Increasing disposable incomes, greater confidence in banks and
increased financial awareness within the population were among the main factors contributing to
this growth. However, the global financial crisis has had a significant impact on the sector.
According to the Central Bank of Russia, net profit within the banking sector decreased
to RUB 96.4 billion in January – November 2009 (compared to RUB 314 billion in 2008). In the
same period, the total assets of all Russian banks increased by 2.4% to RUB 28,691.9 billion,
while in 2008 there was a 39.2% increase and the capital base grew by 21.8% to RUB 4,642.7
billion. At the same time, as a result of high interest rates bank deposits made by Russian
individuals rose by 18.5% in 2009, to RUB 6,998.8 billion.
The top five banks control 47.9% of the assets. The government backs up the
consolidation of the banking sector to increase its effectiveness. Starting 1 January 2010, Russian
banks are supposed to have equity capital exceeding RUB 90 million, and from 2012 the level is
set to increase to RUB 180 million. Hence the number of banks is expected to decrease in the
near future because of capital insufficiency.
Central Bank of Russia
The principal function of the Central Bank is to protect the rouble and ensure its stability;
it is the sole issuer of rubles. The Central Bank sets and pursues a single state monetary policy
and exchange rate policy; manages currency circulation; acts as the lender of last resort for credit
institutions and manages the bank refinancing system; sets the rules for conducting banking
operations; manages most categories of state budget accounts; issues licenses’ to, regulates and
supervises all credit institutions in Russia; and promotes and monitors the proper functioning of

31
payment systems. The Central Bank cooperates with international banking institutions, including
the IMF and the World Bank. It also collaborates on the domestic financial market with the
Federal Insurance Supervisory Service and the Federal Service for Financial Markets to
exchange information and to maintain adequate surveillance over the financial market in general.
The State Dumas is currently considering a proposal to unite the supervisory functions of these
three institutions under one regulatory body. At the end of April 2010 the Central Bank cut the
refinancing rate for the thirteenth time, bringing it to 8% (from a figure of 13% at the beginning
of 2009). The easing of the interest rate is intended to help revive the lending process.
Federal Service for Financial Markets
The Federal Service for Financial Markets (FSFM) is the federal executive body that
regulates and supervises
activity in the financial markets, including stock exchanges. It also regulates the
investment of pension savings. The FSFM’s key objectives are to maintain stability in the
financial markets, make the markets more efficient and attractive to investors, increase market
transparency and reduce investment risks. It regulates the activities of financial market players
and establishes the conditions for issuing and trading securities.
Commercial banks
The banking sector had been developing rapidly, faster than the economy as a whole, and
was one of the most attractive sectors for investment. However, the financial crisis had a marked
impact on the sector: the banks faced liquidity problems, an outflow of funds, and the level of
bad debts increased. The efforts of the Russian Government helped to prevent the collapse of the
banking system. The level of government support provided to banks is considered to be one of
the strongest in the world. In 2009, RUB 280 billion was allocated to support the banking system
(in 2008 over RUB 2 trillion was provided). The total amount of overdue debt reached RUB
1,043.4 billion, of which the Top-20 banks account for 64%. Non-performing loan rates are
expected to continue rising well into 2010. The proportion of overdue loans in the total loan
portfolio reached 5.2%.
Securities

32
The Russian securities market is represented by two major stock exchanges: the Russian
Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX). RTS is for
trading shares, while MICEX is for trading bonds. The RTS stock exchange is Russia’s leading
stock exchange in terms of product offerings. It also calculates the RTS Index, widely used as an
indicator for the Russian securities market. MICEX organises stock transactions and foreign
exchange trading and develops the derivatives market. MICEX is the largest exchange in Russia,
the CIS and Eastern Europe.
Pensions and pension funds
These are regulated by the Federal Service for Financial Markets. In 2009, a significant
pension payments increase took place: the base pension was increased by 8.7% in March and
31.4% in December; the insured part – by 17.5% in April and 7.5% in August. In 2010
approximately 10% of GDP will be assigned to pensions.
The Pension Fund’s budget spending in 2010 will be RUB 4.3 trillion (USD 149.4
billion, or EUR 99.6 billion). Pension payments are to grow by 46% on average.. The 26%
Unified Social Tax that employers previously paid on salaries is replaced by insurance payments
to three funds: the Pension Fund (20%), the Health Insurance Fund (FOMS, 3.1%), and the
Social Security Fund (2.9%). The change came into force on 1 January 2010. As of 1 January
2011, the tax rates will grow to 26%, 5.1% and 2.9% respectively, increasing the social security
tax burden for employers to 34% overall. The Law contains provisions on lowering the tax pay
for some types of payees.
Role of Banking Sector in Russian Economy
The Bank of Russia is the sole issuer of currency. Pursuant to Article 4 of the Bank of
Russia Law, the Bank of Russia performs the following functions:
— In collaboration with the federal government it elaborates and implements a single state
monetary policy;
— It is the sole issuer of cash and organizer of cash circulation;

33
— It approves the graphic designation of the ruble as a sign;
— It is the creditor of last resort for credit institutions and it organizes the credit institution
refinance system;
— It sets the settlement rules in the Russian Federation;
— It sets the rules for conducting banking operations.
— It efficiently manages the Bank of Russia international reserves;
— It takes the decision on the state registration of credit institutions, issues banking licenses to
credit institutions and suspends and revokes them;
— It supervises the activities of credit institutions and banking groups;
— It registers securities issues by credit institutions in compliance with federal laws;
— It organizes and exercises foreign exchange regulation and control pursuant to federal
legislation;
— It sets the procedure for effecting settlements with international organizations, foreign
states and legal entities and natural persons;
— It sets accounting and reporting rules for the Russian banking system;
— It sets and publishes official exchange rates of foreign currencies against the ruble;
— It takes part in the compiling of Russia’s balance of payments forecast and organizes the
compiling of Russia’s balance of payments;
— It performs other functions in compliance with federal laws.
Core Banking Activities Include

34
 Interest calculations
 Processing of cash deposits and withdrawals
 Processing of incoming and outgoing remittances, cheques, etc.
 Customer management
 Customer account management
 Definition of the bank’s products (product management) including such things as
minimum balances, interest rates, number of withdrawals, etc.
 Interest rate definition
 Customer’s standing instructions
 Maintaining records of all financial transactions
Government Spending/Taxation
The Russian federal budget ran growing surpluses from 2001-2007, as the government
taxed and saved much of the rapidly increasing oil revenues. The government overhauled its tax
system for both corporations and individuals in 2000-2001, introducing a 13% flat tax for
individuals and a unified tax for corporations, which improved overall collection. Responding to
demands from the oil sector, the government reduced the tax burden on oil production and
exports, but only marginally. Tax enforcement of disputes continues to be uneven and
unpredictable. In 2007 the federal budget surplus was 5.5% of GDP, and in 2008 the government
ended the year with a surplus of 4.1% of GDP. Although the government revised its budget
projections during 2009 to reflect lower oil prices and the effects of the economic crisis, it ended
the year with a budget deficit amounting to 7.9% of GDP, which it financed from the Reserve
Fund, one of the government’s two stabilization funds. The government’s anti-crisis package in
2008 and 2009 amounted to about 6.7% of GDP, according to World Bank estimates.
Gross Domestic Product
Tighter credit, collapsing global demand, global uncertainty, and rising unemployment
hurt investment and consumption, and led Russia to have -7.9% GDP growth in 2009--a sharp

35
contrast to the pre-crisis performance of 8.1% in 2007. However, 2010 saw Russia’s economy
return to growth with a 3.8% increase in GDP. Russia’s Economic Development Ministry
predicts that the nation’s GDP will grow 4.2% in 2011.
Graph 1 Comparative Position of Banking Sector with India
 Currency comparatives
The Indian Rupee exchange rate depreciated 1.41 percent against the US Dollar during the last
month. During the last 12 months, the Indian Rupee exchange rate depreciated 8.63 percent
against the US Dollar. Historically, from 1973 until 2012 the USDINR exchange averaged 30.49
reaching an historical high of 53.72 in December of 2011 and a record low of 7.19 in March of
1973. The Indian Rupee spot exchange rate specifies how much one currency, the USD, is
currently worth in terms of the other, the INR. While the Indian Rupee spot exchange rate is
quoted and exchanged in the same day, the Indian Rupee forward rate is quoted today but for
delivery and payment on a specific future date.

36
The Russian Ruble exchange rate appreciated 1.08 percent against the US Dollar during the last
month. During the last 12 months, the Russian Ruble exchange rate depreciated 3.99 percent
against the US Dollar. Historically, from 1993 until 2012 the USDRUB exchange averaged
22.90 reaching an historical high of 36.37 in February of 2009 and a record low of 0.98 in
August of 1993.
Graph 2 Stock market comparatives
The SENSEX, a major stock market index which tracks the performance of large companies
based in India, declined 204 points or 4.50 percent during the last month. During the last 12
months, the SENSEX declined 825 points or 4.50 percent, reaching an high of 19701.73 points
in April of 2011 and a low of 15175.08 points in December of 2011. Historically, from 1979
until 2012 the SENSEX market value averaged 5137.07 points reaching an historical high of
21004.96 points in November of 2010 and a record low of 113.28 points in December of 1979.

37
The INDEXCF, a major stock market index which tracks the performance of large companies
based in Russia, rallied 43 points or 9.69 percent during the last month. During the last 12
months, the INDEXCF declined 173 points or 9.69 percent, reaching an high of 1855.97 points
in April of 2011 and a low of 1327.19 points in September of 2011. Historically, from 1997 until
2012 the INDEXCF market value averaged 710.11 points reaching an historical high of 1969.91
points in December of 2007 and a record low of 18.53 points in October of 1998.
Present Position And Trend Of Banking Services
With India During Last Years
RUSSIA Present Position:
The Russian economy gradually returned to a positive growth path and worked hard to overcome
the aftermath of the global crisis. This also had a favorable impact on banks’ activities. Lending
to the economy picked up and the quality of the loan portfolio stabilized and gradually improved
from the third quarter onward. This was an important factor, which contributed to a significant
increase in profitability of banking. The profits that the banks earned in 2010 proved to be the
highest in the last decade and helped offset the losses incurred during the crisis.
The amount of “bad” debt in bank portfolios remains fairly large. Another pressing problem is
non-core assets. The Russia’s system of banking regulation and supervision based on legal

38
requirements and the objectives set forth in the Russian Banking Sector Development Strategy
until 2015, which has been approved by the Russian Government and the Bank of Russia.
INDIA PRESENT POSITION
The Banking sector in India has always been one of the most preferred avenues of employment.
In the current decade, this has emerged as a resurgent sector in the Indian economy. As per the
McKinsey report ‘India Banking 2010’, the banking sector index has grown at a compounded
annual rate of over 51 per cent since the year 2001, as compared to a 27 per cent growth in the
market index during the same period. It is projected that the sector has the potential to account
for over 6.1 per cent in 2012 of GDP with over Rs. 1.7271 trilion in market cap, and to provide
over 1.5 million jobs.
Policies And Norms Of Russia For Import / Export Including Licensing / Permission,
Taxation Etc
1. Customs policy
2. Import restrictions
3. Customs duties
4. Temporary import relief
5. Customs duties incentives
6. Documentation and procedures
7. Warehousing and storage
8. Re-exports
1. Customs policy
Russia’s customs policy has seen several important areas of development:
• Lowering customs duty on technological equipment imports;
• Simplifying the customs clearance process;
• Tighter customs control after the customs clearance of goods;
• Further development of customs integration between Russia, Belarus and Kazakhstan.

39
Certain imports to Russia require permits, certification (e.g., of conformity, sanitation), licences
and other approvals, which should be submitted to the customs authorities during the customs
clearance process. Russia imposes an anti-dumping duty on certain goods (e.g., metal pipes from
Ukraine).
3. Customs duties
Classification of goods
The Russian tariff classification system is based on the internationally adopted Harmonized
Commodity Description and Coding System.
Valuation rules
The customs valuation procedure is established in line with GATT/WTO principles. The customs
value is generally equivalent to the DAF/Russian border transaction value of the goods
concerned.
Rates
Import duty applies to most goods. The majority of customs duty rates in Russia are ad valorem
(i.e., a percentage of the goods’ customs value). There are also specific duties for certain types of
imports, calculated by volume, weight or quantity. Some duties have a combined rate
incorporating the two and, therefore, the tax base may vary. Base customs duty rates vary
widely, from 100% but not less than EUR 2 per litre on spirits to 0% for some printed matter and
certain priority imports. Zero duty applies, for example, to a wide range of equipment and
machinery. On average, duty rates fall between 5% and 20% of the customs value of goods. The
base rates specified in the law apply to countries that enjoy Most Favoured Nation status.

40
Free trade agreements
Russia has adopted free trade agreements with countries of the Commonwealth of Independent
States (CIS). Goods originating from CIS countries (e.g., the Ukraine) are exempt from customs
duty for import to Russia (subject to certain conditions). Russia, Belarus and Kazakhstan form a
Customs Union, and goods originating from these countries are not subject to customs duty
within this Customs Union.
Excise tax
Certain categories of goods are subject to excise tax for import to Russia (e.g., alcoholic
beverages, cigarettes, etc.) Generally, excise tax rates are specific (i.e., based on the volume,
weight or other characteristics of goods).
Import VAT
For most goods, the import VAT rate is 18% of the customs value, inclusive of customs duty and
excise (if any). Food, a certain range of children’s goods and a limited range of other goods may
be subject to 10% or 0% VAT.
Customs processing fees
Customs processing fees are established as a flat fee and vary from approximately
EUR 12 to EUR 2,400 per customs declaration depending on the customs value of imported
goods.
Payments
Customs payments are generally paid before or when submitting customs declarations to
customs.
4. Temporary import relief
Goods may be imported under a temporary import customs regime, normally for a period of up
to two years. Generally, goods are permitted for temporary importation if it is possible to identify
them upon their re-export. Temporary importation requires permission from the customs

41
authorities. Upon expiry of the temporary importation period, goods are moved out of Russia or
placed under another customs regime (e.g., release for free circulation). Temporary importation
requires periodic customs payments of 3% per month of the total customs payments due had the
goods been imported for free circulation. Upon export of the goods, these customs payments are
not refunded. Customs has the right to require a security for customs payments (e.g., a deposit,
pledge, bank guarantee, etc.) Goods that qualify as fixed assets for production purposes may be
admitted and subject to a 3% monthly customs payment for a temporary import period of 34
months if the Russian user does not yet have property rights (e.g., for leasing). After this period,
the goods are considered released for free circulation.
5. Customs duties incentives
Charter capital contributions Fixed production assets imported by a foreign investor as a charter
capital contribution are free from customs duty. The goods must not be excisable and should be
imported within the timeframe established for the formation of the charter capital. Customs
authorities can check to ensure the correct use and further disposal of goods exempted from
customs duty.
VAT exemption
VAT exemption is also available for imported technological equipment; the list of eligible
equipment is approved by the Russian Government.
Tolling
Goods imported into Russia for processing may be placed under an inward processing
(IPR) procedure (subject to certain conditions). Under IPR, goods (e.g., raw materials) imported
for processing are eligible for full exemption from customs duty and import VAT, provided the
processed/finished goods are subsequently moved out of Russia within a deadline agreed on with
customs. No export customs duty is charged upon the export of finished goods from Russia. IPRs
must be authorised by customs. Only a Russian company may apply for an IPR.

42
Special economic zones
A number of special economic zones (SEZ) with a free customs regime have been established in
Russia. Generally, foreign goods imported to and used within the SEZ are eligible for exemption
from import customs duty and VAT. When foreign goods or products of their processing are
subsequently released into free circulation to the rest of Russia, import customs duty and VAT
are payable. If the goods manufactured in a particular SEZ are exported to foreign countries, they
are subject to export duty, if applicable. Foreign goods that were imported into the SEZ but not
processed may be re-exported without paying export customs duty.
Registration of importers and exporters
There is no established procedure for registering importers and exporters with customs.
However, in practice certain documents may be required by customs prior to importation (charter
documents, tax registration certificates, etc.)
Documentation
Russian customs regulations establish a comprehensive list of documents required for customs
clearance purposes. In practice, the set of documents to be submitted to the customs authorities
may vary depending on the character of imported/exported commodities, conditions of the
transaction, etc.
Customs value declarations
The customs value of imported goods is declared in a customs value declaration in which the
customs value should be properly supported by appropriate documents. The list of such
documents may vary depending on the terms of a particular transaction. While Russian customs
regulations provide a general list of documents required to confirm the declared customs value,

43
the list is not exhaustive. If the customs authorities disagree with the customs value declared by
an importer, they may adjust it.
7. Warehousing and storage
Goods which are subject to customs control (e.g., imported goods which have not yet
cleared through customs) can be temporarily stored at special warehouses before being released
by customs. The storage period should not exceed two months, but an importer can ask the
customs authorities to extend it to up to four months. Warehouses for temporary storage are
usually located near customs offices.
8. Re-exports: Goods which have been imported into Russia may be re-exported provided they
have not been released for free circulation in Russia. They are re-exported without payment of
export customs duty.
Present Trade barriers for import / Export
Russia has the following restrictions on market access for foreign financial companies and
institutions:
1 The above mentioned quota of 12% for foreign capital participation in the banking system;
2. The 49% threshold of foreign capital for insurance companies, if they intend to engage in life
insurance, compulsory insurance, compulsory state insurance and insurance for the government
procurement;
3. The total quota for the participation of foreign capital in the insurance sector is not more than
15% (the current value is less than 10%);
4. The requirement for a special type of legal persons to provide services in the banking and
insurance sectors; it is impossible to operate in Russia through the offices of foreign companies;
such operations may only be conducted by a business entity registered in Russia. For credit
institutions, the Central Bank should, in principle, allow the establishment of a credit

44
organization with foreign investments, i.e. participation of each non-resident must be specifically
agreed upon with the Central Bank;
5. Complex, long and expensive procedure for issuing licenses for new branches of banks with
foreign participation;
6. Qualification requirements for foreign entrepreneurs (presenting proof of skills and
qualifications),as well as quantitative limits on the composition of the governing body of the
credit institution: Russian citizens should constitute 50% of the collective governing body of the
credit organization, while in the key positions in the insurance company, Russian citizens should
comprise not less than 49%. In addition, in the insurance companies, the positions of director
general and chief accountant must be occupied by citizens of the Russian Federation.
7. National discrimination: special requirements, creating less favorable conditions for foreign
companies as compared with the Russian services providers: i.e. the minimum charter capital in
the insurance companies with foreign investment is 250 000 of minimum monthly wage, which
is significantly higher than the same requirement for Russian companies; the charter capital of
insurance companies with foreign participation should be fully paid in cash by foreign parties,
while, for the Russian insurers this requirement is not mandatory
Potential for import / export in India
 Enhancing trade and economic cooperation between India and Russia is a key priority for the
political leadership of both the countries. Bilateral trade has witnessed a positive growth despite
the international financial and economic crisis and is on course to meet the target of USD 10
billion turnover by 2010.
 In recognition of the potential for enhanced cooperation, the Indo-Russian Inter-Governmental
Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC)
at its 15 session held on October 21, 2009, set a revised target of bilateral trade turnover of USD
20 billion by 2015. Indian investments in Russia are estimated to be about USD 6.5 billion, bulk
of which are in the energy sector, while Russian investments in India total about USD 1 billion,
primarily in telecommunications sector

45
 A Joint Task Force is simultaneously monitoring the recommendations of a Joint Study Group to
enhance trade and conclude, in future, a Comprehensive Economic Cooperation Agreement
between the two countries. The Indo-Russian Forum for Trade & Investment has evolved into a
platform for facilitating corporate interaction with a regular periodicity between the two
countries.
 The President of the Russian Federation H.E. Mr. Dmitry Medvedev paid an official visit to
India on 21-22 December 2010 at the invitation of the Prime Minister of the Republic of India
H.E. Dr. Manmohan Singh for the 10th Annual Summit meeting under the India Russia Strategic
Partnership.
 During the visit, the following IGA/MOUs, inter alia, were signed between the Governments of
India & Russia:Inter-Governmental Agreement between the Government of the Republic of
India and the Government of the Russian Federation for Enhancement of Cooperation in Oil and
Gas Sector.
 MOU between Ministry of Communications & Information Technology (Department of
Information Technology) of the Republic of India and the Ministry of Telecom and Mass
Communications of the Russian Federation on Cooperation in Information Technology.
Memorandum of Understanding on cooperation in the Pharmaceutical Sector between the
Ministry of Chemicals & Fertilizers of the Government of India and the Ministry of Trade &
Industry of the Government of Russian Federation.
 According to RBI figures, India’s cumulative investments in to Russian economy amounted to
USD 4.23 billion (from 1 April 1960 to 30 June 2010) whereas Russian cumulative investments
into Indian economy amounted to Rs. 2142 crores (from 1 April 1991 to 31 March 2010).
Additionally, ONGC Videsh Limited has also acquired Imperial Energy
 Major investments from India to Russia are of:
(i) ONGC Videsh Ltd. in Sakhalin-1 Project and Imperial Energy.
(ii) ICICI Bank for opening subsidiary ICICI Bank Eurasia
(iii) SBI and Canara Bank for opening JV Commercial Bank of India Ltd
(iv) TATA Motors- Assembly of small capacity lorries and buses
(v) SUN Group-Food processing industry and real estate.

46
(vi) Carborandum Universal- production of abrasives
(vii) Tata Tea
 Major investments from Russia to India are of:
(i) AFK Sistema in Sistema Shyam Telelink Services.
(ii) India-Russia JV for production of titanium products in Orissa
(iii) Opening of branches by VTB and Sber Bank
(iv) Joint venture automotive company between Russian Kamaz Inc and India’s Vectra Group
Retail Sector
Food Retailers
 The biggest food retailer in Russia is X5 RETAIL GROUP, majority owned by oligarch
Mikhail Friedman’s Alfa Group. The company was formed by the merger of soft discount
chain Pyaterochka and supermarket chain Perekrestok in 2006. Based in St. Petersburg, it
runs over 1,500 outlets spread across Moscow and the Urals. After the Kopek buy, the
retailer received the go-ahead to acquire Moscow-based grocer Ostrava. X5 has adopted
the inorganic route to growth, beginning with its acquisition of Paterson supermarket
chain in December 2009.
 MAGNIT OJSC is Russia’s second-biggest food retailer, which runs an expanding
network of hypermarkets and discount groceries. Established in 1994, chief executive
Sergei Galitskiy is the majority shareholder in the company.
 Food retailer O’KEY, Russia’s third biggest grocer by sales, listed its global depository
receipts in London recently. The company, which has been pursuing an aggressive
expansion strategy over the past five years, operates more than 50 stores spread across 18
cities.
 Russian food retailer DIXY GROUP, which runs discount chains, is controlled by Igor
Kesayev through his Mercury Holdings. At the beginning of 2010, the company had 552
stores, an improvement from the 492 outlets it had a year ago.
 Supermarket chain SEVENTH CONTINENT, based in Moscow, is majority-owned by
Alexander Zanadvorov. The retailer took control of mid-sized Fiserv’s Bank early last
year to develop it as the company’s in-store bank.

47
 Privately-held hypermarket chain Lenta, based in St. Petersburg, is embroiled in a
shareholder dispute. Established in 1993, the company now runs some 36 stores in
Russia. U.S. businessman August Meyer has a 36% stake in the company, while private
equity firm TPG holds about 35% and European Bank for Reconstruction and
Development owns around 11%.
 Medium-sized retailer Victoria is planning to come out with an initial public offering this
year, which would make it the fifth listed food retailer in Russia. Victoria runs about 230
stores in Moscow, Kaliningrad, and St. Petersburg, and is 35% owned by businessman
Vlasenko.
White goods retailers
 M.Video, a consumer electronics retailer, offers televisions, DVD players, and video
cameras, among other similar goods. Chief Executive Alexander Tynkovan is the
controlling shareholder of the number one electronics retailer in Russia.
 From its humble beginnings 17 years ago, the company currently runs 184 retail outlets.
M.Video, which is listed on the Mice stock exchange, faces direct competition from
Metro AG’s household appliances unit Media Market.
 Unlisted competitors Mir and Tekhnosila are currently undergoing bankruptcy
proceedings.
 Moscow-based OOO Eldorado, which sells consumer electronics goods and household
appliances, was established in 1994. Czech investment company PPF took over Eldorado
in 2009, as the retailer defaulted on a $500 million loan taken against a controlling stake
in the firm.
Table 1 Major food retailers operating in Russia
Name of Company FY 2009 Sales ($
bn)
Market Share Listed/Unlisted
X5 Retail Group $8.7 billion 26.3% Listed
Magnit OJSC $5.4 billion 16.2% Listed
Auchan $4.9 billion 15.3% Unlisted

48
Tab
le 2
Maj
or
Table 2 food retailers operation in India
Sour
ce:http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCMQFjA
A&url=http%3A%2F%2Fwww.ncap.res.in%2Fcontract_%2520farming%2FResources%2F3.%2
520P.G.%2520Chengappa.pdf&ei=VfecT5WBM8emrAezyulD&usg=AFQjCNFJfRN2TdtZmyR
HmqxTMMs1nkBQSA
Metro AG $4.2 billion 12.8% Listed
O’Key $2.1 billion 6.4% Listed
Kopeika $1.7 billion 5.4% Unlisted
Lenta $1.7 billion 5.3% Unlisted
Dixy $1.6 billion 5.1% Listed
Seventh Continent $1.3 billion 4.1% Listed
Victoria $1.0 billion 3.1% Unlisted

49
Economy of Russia
Economic Overview
 Russia has undergone significant changes since the collapse of the Soviet Union, moving
from a globally-isolated, centrally-planned economy to a more market-based and
globally-integrated economy. Economic reforms in the 1990s privatized most industry,
with notable exceptions in the energy and defense-related sectors.
 The protection of property rights is still weak and the private sector remains subject to
heavy state interference. Russian industry is primarily split between globally-competitive
commodity producers - in 2009 Russia was the world's largest exporter of natural gas, the
second largest exporter of oil, and the third largest exporter of steel and primary
aluminum - and other less competitive heavy industries that remain dependent on the
Russian domestic market.
 This reliance on commodity exports makes Russia vulnerable to boom and bust cycles
that follow the highly volatile swings in global commodity prices. The government since
2007 has embarked on an ambitious program to reduce this dependency and build up the
country's high technology sectors, but with few results so far.
 The economy had averaged 7% growth since the 1998 Russian financial crisis, resulting
in a doubling of real disposable incomes and the emergence of a middle class. The
Russian economy, however, was one of the hardest hit by the 2008-09 global economic
crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied
on dried up.
Foreign forays into the retail segment
 Since the beginning of the last decade, global retailers have been trying to gain a toehold
in the lucrative Russian consumer market. Slowing sales in Western markets have lured
big international players to seek expansion in fast-growing emerging markets such as
Russia. While the likes of Wal-Mart seem to have given up for the time being, others
such as France’s Aachen and Germany’s Metro have been hugely successful.

50
 Germany’s Metro AG was among the early birds to arrive in Russia, setting up its first
Moscow store in 2001. The retailer, which runs Metro Cash & Carry, and Real and Media
Market household appliances stores, operates more than 70 outlets in Russia.
 Around the same time when French retailer Carrefour decided to call it quits in 2009,
fellow supermarket chain Aachen not only decided to stay entrenched in Russia but has
been on an expansion drive ever since. Aachen started operations in 2002 and currently
runs more than 30 hypermarkets.
 Perhaps the most high-profile exit from Russian retail market was Wal-Mart’s recent
decision to abandon its plans to expand in Russia. The world’s biggest retailer had
planned to grow its business in Russia through the acquisition of local players.
 Apparently, Wal-Mart was eyeing retail chain Kopek, which was later acquired by X5
Retail Group. Another potential acquisition target, privately-held Lento, found itself
entangled in a shareholder dispute. Close on the heels of these corporate developments,
Wal-Mart said it was closing its Moscow office, citing lack of opportunities for
acquisitions.
 For now, Wal-Mart seems to have shifted its focus to other emerging markets such as
South Africa, by recently moving to acquire a majority stake in retailer Massmart
Holdings. Swedish furniture retailer IKEA, which runs 12 stores in Russia since 2000,
has often complained of increased bureaucratic interference and corruption and has said it
has no plans to open new stores in the country in the next few years.
 Despite the procedural hassles involved in setting up a business in Russia, many global
retailers seem to have realized that Russia is too big a market to be ignored. Finnish
retailer Kesko Oyjsaid it intends to launch its food business in Russia in 2010.
 The company, which currently runs more than 10 hypermarkets selling building materials
in Russia, also anticipates making acquisitions to expand its presence in the country.
U.S.-based footwear retailer Collective Brands Inc. and apparel retailer Limited Brands,
known for its lingerie brand Victoria’s Secret, have their plans chalked out for the
Russian market.
 Japanese clothing retailer Unable, a unit of Fast Retailing, which set up shop in Russia in
2010, expects to open more stores in the country. And McDonald’s has a come a long
way since setting up shop 20 years back, with almost 80%

51
 According to a review by McKinsey, business processes should be thoroughly overhauled
and dated store formats need to be replaced. The report points out that although Russia
has made good progress in adopting modern store formats, they reflect a meager 11% of
the jobs in the retail sector and 35% of retail sales in Russia.
 To put things in perspective, modern formats contribute 82% and 86% of retail sales in
France and Germany respectively. To make the system work more effectively, Russia
needs to boost the productivity of the sector. Staffing levels in Russian stores should be
brought in sync with customer traffic, as is the case with retailers based in the United
States. Employing part-time labor will help bring down the operating costs of retailers.
Russian stores also need to make full use of information technology to streamline their
operations.
Table 3 Food and Beverage production in Russian and India
Russia India
Position 12 3
Nos. of listed company in F&B
Sector
7 229
Top 3 domestic companies
based on revenues
Baltika Brewery-Cls: $3.7
billion USD
Wimm-Bill-Dann Foods-Cls:
$2.8 billion USD
Unimilk Ojsc-Brd: $1.6 billion
USD
Ruchi Soya Industries: $2.7
billion USD
United Breweries Holdings:
$1.2 billion USD
United Spirits Limited: $1.2
billion USD
Top 3 products exported and
their value
Wheat: $3.6 billion USD
Sunflower Oil: $467 million
USD
Barley: $416 million USD
Rice milled: $2.3 billion USD
Cotton: $2.1 billion USD
Cake of Soybean: $1.6 billion
USD
Source:- www.imap.com

52
Table 4 PRODUCTION OF WHEAT IN RUSSIA AND INDIA
Russia (Production in Int$
Million)
India (Production in Int $
Million)
Year 2005 2006 2007 2005 2006 2007
Wheat 4628 4382 4771 10164 10251 11242
Table 5 CONTRIBUTION IN GDP BY THE AGRICULTURE SECTOR
IN PERCENTAGE (%) IN MILLION
DOLLARS
NOMINAL
GDP
PPP
NOMINAL
GDP
PPP GDP
SECTOR
NOMINAL
GDP
PPP GDP
SECTOR
INDIA 18.1 18.5 303382 1,676,143 4060392
RUSSIA 4.2 4 77717 88918 1850401 2222957

53
Table 6 Food production and nutrition
Number of people undernourished in
1999/2001:
India 213.7
Mio.
Russia 6.2 Mio.
Proportion of undernourished in total
population in 1999/2001: India 21% Russia 4%
Dietary energy supply in total population
(kcallperson/day) 1999/2001: India 2492 Russia 2944
Crop and livestock production 1983-1992
(average annual growth rate): India 3.9% Russia 11.0%
Crop and livestock production 1993-2002
(average annual growth rate): India 2.1% Russia -2.2%
Per capita food production 1983-2002
(average annual growth rate): India 1.2% Russia 0
Statistical Appendix:
(Source:- FAO 2004: State of Food and Agriculture. New York)
 Generally, if goods are exported or imported between a foreign company and a Russian
company, the Russian company is responsible for the customs clearance procedures.
 In order to import goods into Russia and clear them through customs, an importer has to
make all customs payments due under the
Import Export Policy of Russia

54
 Chosen customs regime and comply with other customs legislation requirements (e.g.,
certification requirements
 The import of certain goods (e.g., pharmaceuticals, meat, etc.) requires licenses
 Russia has several special economic zones that offer customs benefits
1. Customs policy
Russia’s customs policy has seen several important areas of development:
• Lowering customs duty on technological equipment imports;
• Simplifying the customs clearance process;
• Tighter customs control after the customs clearance of goods;
• Further development of customs integration between Russia, Belarus and Kazakhstan.
Certain imports to Russia require permits, certification (e.g., of conformity, sanitation), licenses
and other approvals, which should be
Submitted to the customs authorities during the customs clearance process. Russia imposes an
anti-dumping duty on certain goods
(e.g., metal pipes from Ukraine).
3. Customs duties
Classification of goods
 The Russian tariff classification system is based on the internationally adopted
Harmonized Commodity Description and Coding System.
Valuation rules:-The customs valuation procedure is established in line with GATT/WTO
principles. The customs value is generally equivalent tothe DAF/Russian border transaction
value of the goods concerned.
Rates
 Import duty applies to most goods. The majority of customs duty rates in Russia are ad
valorem (i.e., a percentage of the goods ‘Customs value).
 There are also specific duties for certain types of imports, calculated by volume, weight
or quantity. Some duties have a combined
Rate incorporating
 The two and, therefore, the tax base may vary. Base customs duty rates vary widely, from
100% but not less than EUR 2 per liter on spirits to 0% for some printed matter and
certain priority imports.

55
 Zero duty applies, for example, to a wide range of equipment and machinery. On average,
duty rates fall between 5% and 20% of the customs value of goods. The base rates
specified in the law apply to countries that enjoy Most Favored Nation status.
 Certain raw materials and handmade goods from “developing” and “least developed”
countries may be imported at 75% of the base rates or zero rates, respectively. Goods
originating in other countries will be subject to duty at double the base rates.
 The following goods are exempt from customs duty: transit goods; goods imported by
individuals for personal use (worth not more than approximately EUR 1,500 and
weighing less than 35 kg); cultural valuables; means of transport involved in the
international movement of goods and passengers; humanitarian aid and some others.
Free trade agreements
 Russia has adopted free trade agreements with countries of the Commonwealth of
Independent States (CIS). Goods originating from CIS countries (e.g., the Ukraine) are
exempt from customs duty for import to Russia (subject to certain conditions). Russia,
Belarus and Kazakhstan form a Customs Union, and goods originating from these
countries are not subject to customs duty within this Customs Union.
Excise tax
 Certain categories of goods are subject to excise tax for import to Russia (e.g., alcoholic
beverages, cigarettes, etc.) Generally, excise tax rates are specific (i.e., based on the
volume, weight or other characteristics of goods).
Import VAT
 For most goods, the import VAT rate is 18% of the customs value, inclusive of customs
duty and excise (if any). Food, a certain range of children’s goods and a limited range of
other goods may be subject to 10% or 0% VAT.
Customs processing fees
 Customs processing fees are established as a flat fee and vary from approximately EUR
12 to EUR 2,400 per customs declaration depending on the customs value of imported
goods.
Payments
 Customs payments are generally paid before or when submitting customs declarations to
customs.

56
Customs duties incentives
 Charter capital contributions fixed production assets imported by a foreign investor as a
charter capital contribution are free from customs duty. The goods must not be excisable
and should be imported within the timeframe established for the formation of the charter
capital. Customs authorities can check to ensure the correct use and further disposal of
goods exempted from customs duty.
VAT exemption:
 VAT exemption is also available for imported technological equipment; the list of
eligible equipment is approved by the Russian Government.
Tolling :-
 Goods imported into Russia for processing may be placed under an inward processing
(IPR) procedure (subject to certain conditions). Under IPR, goods (e.g., raw materials)
imported for processing are eligible for full exemption from customs duty and import
VAT, provided the processed/finished goods are subsequently moved out of Russia
within a deadline agreed on with customs.
 No export customs duty is charged upon the export of finished goods from Russia. IPRs
must be authorized by customs. Only a Russian company may apply for an IPR.
Special economic zones:-
 A number of special economic zones (SEZ) with a free customs regime have been
established in Russia. Generally, foreign goods imported to and used within the SEZ are
eligible for exemption from import customs duty and VAT.
 When foreign goods or products of their processing are subsequently released into free
circulation to the rest of Russia, import customs duty and VAT are payable. If the goods
manufactured in a particular SEZ are exported to foreign countries, they are subject to
export duty, if applicable. Foreign goods that were imported into the SEZ but not
processed may be re-exported without paying export customs duty.
Registration of importers and exporters

57
 There is no established procedure for registering importers and exporters with customs.
However, in practice certain documents may be required by customs prior to importation
(charter documents, tax registration certificates, etc.)
Documentation :-
 Russian customs regulations establish a comprehensive list of documents required for
customs clearance purposes. In practice, the set of documents to be submitted to the
customs authorities may vary depending on the character of imported/exported
commodities, conditions of the transaction, etc.
 Customs value declarations :-The customs value of imported goods is declared in a
customs value declaration in which the customs value should be properly supported by
appropriate documents. The list of such documents may vary depending on the terms of a
particular transaction. While Russian customs regulations provide a general list of
documents required to confirm the declared customs value, the list is not exhaustive. If
the customs authorities disagree with the customs value declared by an importer, they
may adjust it.
5. Re-exports
 Goods which have been imported into Russia may be re-exported provided they have not
been released for free circulation in Russia. They are re-exported without payment of
export customs duty.
Objectives
This unit helps you to understand:
• What is trade policy?
• Kinds of trade policy
• Phases of liberalization in trade policies in the process of economic development
• Trends in India's Exim policies
• Salient features of Current Export - Import Policy (2002-07)
EXPORT IMPORT POLICY 2002-2007: OBJECTIVES
Import Export Policy of India

58
 This policy came into force with effect from 151 April, 2002 and shall remain in force up
to 31st March 2007 and will be co-terminus with the Tenth Five Year Plan (2002-2007)
The principal objectives, of this Policy are :
i. To facilitate sustained growth in exports to attain a share of at least 1% of global
merchandise trade
ii. To stimulate sustained economic growth by providing access to essential raw materials,
intermediates, components, consumables and capital goods required for augmenting
production and providing services.
iii. To enhance the technological strength and efficiency of Indian agriculture, industry and
services, thereby improving their competitive strength while generating new employment
opportunities, and to encourage the attainment of internationally accepted standards of
quality.
iv. To provide consumers with good quality goods and services at internationally
competitive prices while at the same time creating a level playing field for the domestic
producers.
 Some key provisions of the EXIM Policy 2002-2007 have been given in Sections 7.6 -
7.10.
GENERAL PROVISIONS REGARDING IMPORTS... AND EXPORTS
 Some of the general provisions regarding imports and exports as outlined in the policy
are as given below:
1) Exports and Imports free unless regulated: Exports and Imports shall be free, except
in cases where they are regulated by the provisions of this Policy or any other law for the
time being in force.
2) Importer-Exporter Code Number:No export or import shall be made by any person
without an Importer-Exporter Code (IEC).number unless specifically exempted. An
Importer-Exporter Code (IEC) number is granted on application by the competent
authority in accordance with the procedure specified in the Handbook of Procedures
(Vol. I).
3) Actual User Condition: Capital goods, raw materials, intermediates, components,
Consumables, spares, parts, accessories, instruments and other goods, which are
importable without any restriction, may be imported by any person. However, if such

59
imports require a license/certificate/ permission, the actual user alone may import such
goods unless the actual user condition is specifically dispensed with by the licensing
authority
4) Export of Imported Goods: Goods imported, in accordance with this Policy, can be
exported in the same or substantially the same form without a license/certificate/
permission provided that the item to be imported or exported is not mentioned as
restricted for import or export. Exports of such goods imported against payment in freely
convertible currency are permitted against payment in freely convertible currency.
5) Free movement of export goods: Consignments of items meant for exports shall not be
withheld / delayed for any reason by any agency of the Central/ State Government. In
case of any doubt, the authorities concerned may ask for an undertaking from the
exporter.
6) Registration-cum-Membership Certificate: Any person, applying for (i) a license/
certificate/ permission to import/ export, [except items listed as restricted items] or (ii)
any other benefit or concession under this policy shall be required to furnish Registration-
cum-Membership Certificate (RCMC) granted by the competent authority in accordance
with the procedure specified in the Handbook of Procedures (Vol.]) unless specifically
exempted under the Policy.
PROMOTIONAL MEASURES
 Some of the key promotional measures undertaken by the Government under this policy
are as given below
1) Central Assistance to States: The State Governments are encouraged to fully participate
in encouraging exports from their respective states. For this purpose, suitable provisions
are made in the Annual Plan of the Department of Commerce for allocation of funds to
the states on the twin criteria of gross exports and the rate of growth of exports from
different states. The States utilize this amount for developing complementary and critical
'infrastructure
2) Market Access Initiative :Financial assistance is made available under the scheme to the
export promotion councils, industry and trade associations and other eligible entities, as
may be notified from time to time, on the basis of the competitive merits of proposals
received in this regard for the following purposes which inter-alia includes:-

60
• Marketing studies on country product focus approach basis.
• Setting up of common showrooms under one roof and warehousing facility in the
identified centers onthe basis of marketing studies in important cities abroad.
Participation in sales promotion campaigns through international departmental stores.
• Publicity campaign for launching identified products in selected markets.
3) Participation in international trade fairs, seminars, buyers sellers meet.
• Promotion of select brands.
• Transport subsidies for select agriculture products.
• Registration charges for product registration abroad for pharmaceuticals, bio-
technology and agro chemicals and testing charges for engineering products.
• Inland freight subsidies for units located in North East, Sikkim and Jammu
&Kashmir.
• Setting up of "business center" in Indian missions abroad for visiting Indian
exporters/businessmen.
4) Brand Promotion and Quality: The Central Government aims to encourage
manufacturers and exporters to attain internationally accepted standards of quality for
their products. The Central Government extends support and assistance to trade and
industry to launch a nationwide programmed on quality awareness and to promote the
concept of total quality management.
5) Status Certificate: Merchant as well as Manufacturer Exporters, Service Providers,
Export Oriented Units (EOU's)/ Units Located in Export Processing Zones (EPZ's)/
Special Economic Zones (SEZ's) / Agra Export Zone (AEZ's)/ Electronic Hardware
Technology Parks (EHTPs)/ Software Technology Parks (STPs) shall be eligible for such
recognition.
 The applicant is required to achieve the prescribed average export performance level:
Category Average FOB/ FOR value
during the preceding three
licensing years (in Rupees)
FOB/ FOR during the
current licensing year
(in Rupees)
Export House 15 Crore 45 Crore

61
Trading House 100 Crore 300 Crore
Star Trading House 500 Crore 1500 Crore
Superstar Trading
House
2000 Crore 6000 Crore
 The status holders are eligible for the following special facilities:
• License/certificate/permissions and Customs clearances for both imports and exports on self-
declaration basis;
• Fixation of Input-Output norms on priority;
• Priority finance for medium and long term capital requirement as per conditions notified by
RBI;
• Exemption from compulsory negotiation of documents .through banks. The remittance,
however, would continue to be received through banking channels;
• 100% retention of foreign exchange in EEFC account;
• Enhancement in normal repatriation period from 180 days to 360 days.
6) Electronic Data Interchange: In an attempt to speed up the transactions, reduce physical
interface and to bring about transparency in various activities related to exports, electronic data
interchange is encouraged. Applications received electronically are cleared within 24 hours.
EXPORT PROMOTION CAPITAL GOODS SCHEME
 EPCG Scheme: The scheme allows import of new capital goods including CKD/SKD
thereof as well as computer software systems at 5% Customs duty subject town export
obligation equivalent to 5 times CIF value of capital goods to be fulfilled over a period of
8 years reckoned from the issuance of license over a period of 8 years.
 Eligibility: The scheme covers manufacturer exporters with or without supporting
manufacturer(s)/vendor(s), merchant exporters tied to supporting manufacturer(s) and.
service providers.
 Conditions for Import of Capital Goods: Import of capital goods is subject to Actual
User condition till the export obligation is completed.
DEEMED EXPORTS

62
"Deemed Exports" refers to those transactions it which the goods supplied do not leave the
country.
The following categories of supply of goods by the main/ sub-contractors are regarded as
"Deemed Exports" under this Policy, provided the goods are manufactured in India:
(a) Supply of goody, against Advance License/DFRC under the Duty Exemption / Remission
Scheme.
(b) Supply of goods to Export Oriented Units (EOL's) or units located in Export Processing
Zones (EPZs) or Special Economic Zone (SEZs) or Software Technology Parks (STPs)
or Electronic Hardware Technology Parks (EHTPs);
(c) Supply of capital goods to holders of licenses under the Export Promotion Capital Goods
(EPCO) scheme;
(d) Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by
the Department of Economic Affairs, Ministry of Finance under International
Competitive Bidding in accordance with the procedures of those agencies/funds, where
the legal agreements provide for tender evaluation without including the customs duty;
(e) Supply of capital goods, including in unassembled/ disassembled condition as well as plants,
machinery, accessories, tools, dies and such goods which are used for installation
purposes till the stage of commercial production and spares to the extent of 10% of the
FOR value to fertilizer plants.
(f) Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a
notification, permits the import of such goods at zero customs duty coupled with the
extension of benefits under this chapter to domestic supplies;
(g) Supply of goods to the power and refineries not covered in (0 above.
(h) Supply of marine freight containers by 100% EOU (Domestic freight-containers
manufacturers) provided the said containers are exported out of India within 6 months or such
further period as permitted by the Customs. (i) Supply to projects funded by UN agencies.
(j) Supply of goods to nuclear power projects through competitive bidding as opposed to
international competitive bidding.
 The benefits of deemed exports are available under paragraph (d), (e), (f) and (9)
above only if the supply is made under the procedure of International Competitive
Bidding (ICB).
 Deemed exports are eligible for any/all of the following benefits in respect of
manufacture and supply of goods qualifying as deemed exports subject to the terms and
conditions as given in Handbook (Vol. I):-
(a) Advance License for intermediate supply/ deemed export.
(b) Deemed Exports Drawback.

63
(c) Refund of Terminal Excise duty.
Full text of the EXIM POLICY 2002-2007 as well as the Handbook of Procedures is available on
DGFT website dgft.delhi.nic.in. For details you may visit this website.
Transportation and logistics
 After 1991, India’s trade with Russia had been taking place through Novorossiisk and
St. Petersburg. Throughout the 1990s, Novorossiisk registered long queues and excessive
demand on limited facilities – the result of diversion of Russia-bound traffic from
Ukrainian ports. St. Petersburg became the preferred port of entry – however, it was
extremely expensive and Customs’ procedures were difficult to deal with.
 Although ice-cutters and convoys ensure that both ports were accessible all year round,
the problem of winter freezing added a further complication to commerce. The heavy
costs of demurrage at Russian ports and expensive and unreliable warehousing has-been a
problem that has encouraged trade through third countries.
 As a result, goods bound for Russia pass through alternative routes – undermining
bilateral trade. Such routes also include agents in Dubai and Hamburg – who act as
importers who re-export the goods to Russia as part of a general trade in goods with a
number of countries.
 Goods also pass through Tallinn and Riga.
 The Russian side expressed that Russian companies are also facing problems in terms of
handling facilities and turn-around time at some Indian ports. Indian side expressed that
major steps have been taken to upgrade the facilities and required infrastructure at the
Indian ports to modernize them.
 As far as both Russian and Indian companies prefer to transport cargo through the ports
of the third countries, Russia and India should examine this practice more carefully in
order to understand the reasons of this.
 Russian side informed that this year Russian Government will consider a bill on the
Special Economic Zones (SEZ) in Ports. It is expected that in 2007, the related legislation
will come into force.
Present Trade Barriers of Import/Export

64
 This type of SEZ will help to upgrade the infrastructure of the main Russian ports due to
the investment of residents of this zones. Hence the problems connected with the queues
and limited facilities in Novorossiisk and St. Petersburg will be gradually surmounted.
Technical Barriers to Trade (TBT) -Certification, Standards and Regulations
 The differences in technical product requirements, first of all in mandatory requirements,
and the nation-specific conformity-rating rules and procedures may impose significant
barriers in international trade, which are regarded as a special area of trade restrictions,
the so-called "Technical Barriers to Trade(TBT)" or "Sanitary and Phytosanitary
measures(SPS)", and are governed by special-purpose WTO agreements such as
Agreements on Technical Barriers and Trade and Agreements on Sanitary
andPhytosanitary Measures.
 The JSG notes that the health and safety standards should be based on the relevant
international standards, guidelines and recommendations to improve the compatibility of
technical regulations and standards between both countries.
 India expressed its view that the Russian Authorities may recognize and technically
collaborate with the official export inspection agency of India or any other certifying
agency in India for issuing the health and safety certificates for Indian exports to Russia.
 In India, there are over 100 specific commodities (including food preservatives and
additives, milk powder, infant milk foods, certain types of cement, household and similar
electrical appliances, gas cylinders, tires, and multi-purpose dry cell batteries)that the
Bureau of Indian Standards (BIS) must certify before the products are allowed to enter
the country.
 A system now exists by which foreign companies can receive automatic certification for
products made outside India, provided BIS has first inspected and licensed the production
facility (at the manufacturer’s expense).Licensing fees include the cost of the initial
inspector's visit and tests, an annual fee of approximately $2,000 and a marking fee that
ranges from 0.2 percent to 1 percent of the value of certified goods imported into or
produced in India. Potential Russian exporters could be made aware of these
requirements.
Other Non Tariff barriers to trade

65
 All trade from Russia, outside the debt repayment depends on the opening of a letter of
credit (LC) on a Russian bank. Traditionally, the Central Bank of Russia does not
guarantee the status of any of its banks to evoke trust in India. At the same time, Indian
banks refuse to accept letters of credit and open correspondent accounts to the Russian
commercial banks without such guarantees.
 Many companies, both Indian and Russian, complain that such situation creates barriers
to increase trade between the two countries by increasing costs and time of provision of
financial services. It was noted that the two central banks have facilitated the process of
acceptance of guarantees of Russian banks and a list of top 10 Russian banks has been
circulated to Indian banks.RBI has also proposed to Indian Banks Association (IBA) to
send a delegation of Indian banks to Russia to have discussions with Russian banks.
 Removal of informal barriers to trade:
i. Identifying a list of banks in consultation with the Reserve Bank of India and the Central
Bank of Russia for opening of Letter of Credit (Loc).
ii. Consider the possibility of Mutual Recognition Agreements on Conformity Assessment
and Equivalence, and Agreement on Health and Safety Standards for various categories
of goods, in line with the WTO norms.
iii. Collaboration between the concerned technical Bodies of the Indian and Russian side to
consider identification and mutual recognition of certificates issued by the certification
agencies.
iv. Simplification and shortening of procedures for certification.
v. Providing incentives for the development of reliable warehousing at major ports.
Business opportunities of Retail Sector in India
 Retail and real estate are the two booming sectors of India in the present times. And if
industry experts are to be believed, the prospects of both the sectors are mutually
Business Opportunities of India in Russia
(In Retail Sector)

755 russia

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (17)

Similar to 755 russia

Similar to 755 russia (20)

Recently uploaded

Recently uploaded (12)

755 russia