MSME pivot to India-Russia trade: India and Russia have long shared a strategic relationship built on defence, energy, and geopolitics. As President Vladimir Putin arrives in New Delhi for the 23rd India-Russia Annual Summit, these familiar pillars will draw global attention. They matter even now, when supply chain uncertainty and geopolitical realignments define the global economy. Yet the more durable opportunity lies elsewhere. The next phase of bilateral engagement can be shaped by micro, small, and medium enterprises. MSMEs offer a scale, diversity, and agility that large government-led projects cannot match.
India has more than 63 million MSMEs, generating over 110 million jobs, making them the largest employer after agriculture, according to the Ministry of MSME. Their reach into manufacturing, services, and exports provides a natural foundation for a new economic compact with Russia. Russia, meanwhile, is rebuilding its small-business base in engineering, mining technologies, agri-processing, and digital services.
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MSME role in diversifying India-Russia trade
India’s MSMEs contribute nearly 30% to GDP and around 45% of exports, giving them a central role in the economy. Their ability to produce more than 6,000 goods places them deep within global supply chains. Russia’s own capabilities in industrial design, heavy engineering, railway technology, metallurgy, and R&D make the complementarities even sharper.
Indian MSMEs bring cost-effective innovation in pharmaceuticals, textiles, engineering goods, food products, and digital services, while Russian enterprises supply specialised technologies and high-quality engineering inputs. Together, these strengths can support the bilateral target of USD 100 billion trade by 2030, while helping correct the current imbalance. India’s imports from Russia reached USD 63.8 billion in FY25, while exports remain modest, according to the Ministry of Commerce.
Policy convergence has been building. The 2019 Intergovernmental Agreement on joint defence spare manufacturing opened entry points for Indian MSMEs into complex supply chains. The India-Russia Inter-Governmental Commission has consistently identified MSMEs as a priority for deeper cooperation. Negotiations on the India–Eurasian Economic Union (EAEU) Free Trade Agreement, launched in 2025, are expected to widen export opportunities for Indian MSMEs in pharmaceuticals, engineering, agro-processed products, and speciality chemicals.
Bilateral regulatory coordination has also begun to address non-tariff barriers and payment challenges that have long hindered smaller exporters. These shifts are visible in market behaviour: Russian companies trading with India increased from around 2,000 in 2021 to nearly 10,000 in 2025, signalling a broadening economic base.
New sectors offer avenues for MSME collaboration
The scope for new MSME-driven sectors is expanding rapidly. Pharmaceuticals and healthcare offer one of the most promising avenues, with India being the world’s largest supplier of generic medicines and Russia facing strong demand for reliable and affordable drug imports. A coordinated supply chain spanning the two markets could reinforce medicine security across Eurasia.
Digital cooperation is another frontier. Both countries are exploring joint work on cybersecurity tools, AI platforms, cloud solutions, and alternative payment ecosystems. Such collaboration supports technological sovereignty and reduces dependence on Western digital infrastructure. Agro-processing and food products present yet another opportunity. Russian consumers are increasingly drawn to Indian spices, teas, ready-to-eat foods, snacks, and marine products, creating predictable demand for thousands of Indian MSMEs.
Engineering and infrastructure prospects are equally compelling. Indian MSMEs can supply engineering goods and specialised components that support Russia’s diversification goals, while Russian capabilities in mining, metallurgy, and railways create potential contracting opportunities for Indian firms.
Cultural and creative industries are also gaining traction as rising middle-class incomes in both countries expand markets for cinema, music, literature, and other cultural exports. Education adds a further layer of cooperation, as India’s rapidly expanding university ecosystem creates opportunities for joint programmes, skill centres, and research collaborations.
MSMEs offer resilience that mega projects cannot
Large bilateral projects—whether steel plants, nuclear reactors, or defence platforms—have historically shaped India-Russia ties. These projects matter, but they remain tied to government decisions and geopolitical conditions. MSMEs, by contrast, create decentralised and resilient linkages. A coder in Novosibirsk collaborating with a Bengaluru start-up, a chikankari collective in Lucknow supplying boutique stores in Moscow, or a self-help group in Madhya Pradesh exporting pickles to Russian supermarkets illustrate how small enterprises can build a bottom-up economic bridge that operates independently of political cycles.
The model aligns naturally with India’s national priorities, including support for entrepreneurship, women-led enterprises, and integration into global value chains. Russia’s own efforts to diversify its economy away from raw materials and toward high-value technology and manufacturing deepen this alignment. MSMEs do more than create trade; they create trust, familiarity, and long-term commercial partnerships.
A policy roadmap for an MSME-centred partnership
A coherent institutional framework is essential if both countries are to unlock the full potential of MSMEs. Joint incubation and acceleration centres in India and Russia could provide training, innovation support, and sector-specific R&D. Cross-border financing windows, including bilateral credit lines and guarantee mechanisms, can ease capital constraints that MSMEs often face when entering new markets.
Trade procedures must also become simpler and more predictable, especially in customs protocols, standards harmonisation, and regulatory clearances. Greater certainty can significantly reduce transaction costs and encourage more MSMEs to explore cross-border opportunities. An annual India-Russia MSME Summit would help maintain momentum and allow governments, financial institutions, and entrepreneurs to review progress.
The future of India-Russia relations will depend increasingly on the economic networks sustained by millions of small firms. When a young entrepreneur in India ships a handcrafted product to a buyer in Moscow, or when an engineer in Russia collaborates with a team in Hyderabad on AI solutions, a more inclusive and resilient relationship takes root. MSMEs can expand employment, diversify trade, and introduce new layers of commercial cooperation that do not hinge solely on large government-led projects.
As global alignments shift, both countries have the rare chance to build a partnership that is broad-based and people-driven. Elevating MSMEs from the margins to the centre of bilateral strategy would be a strong step toward a more balanced and future-ready economic relationship.
Juuhi Rajput is a Research Scholar in JNU.
Dr Charan Sigh is a Delhi-based economist. He is the chief executive of EGROW Foundation, a Noida-based think tank, and former Non Executive Chairman of Punjab & Sind Bank. He has served as RBI Chair professor at the Indian Institute of Management, Bangalore.