North-South Corridor Being Held Back by Poor Fit of Products Exchanged between Russia and India

Paul Goble

            Staunton, August 1 – The North-South trade corridor between Russia and India is being held back by the poor fit between the goods flowing in the two directions.  Russia exports mostly bulk raw materials, and India mostly finished products. The two thus need very different rail cars and those sent in one direction return empty when returning.

            Russia exports coal and other unprocessed raw materials in open cars, while India sends north mostly finished consumer goods in container cars. After delivering these goods, they cannot carry back trade sent in the other direction. That dramatically increases the price of carriage on the route and is limiting its development.

            According to Rex news agency analyst Yevgeny Tsots, this problem can be overcome if Russia increases its sales of consumer goods to India or gets involved in giant construction projects in India where the problem of excess costs arising from empty cars returning will be less (iarex.ru/articles/81981.html).

            But unless Moscow is able to do so by improving information in India about Russian consumer goods and about Russia’s capacity to build huge projects, this lack of fit between exports and imports on the north-south route will mean that this intermodal route – via land and sea – will remain less attractive despite all Moscow’s boosterism and investment.

            Tsots does not speak to the way in which this lack of fit is characteristic of many routes passing to and from and through Russia, but it is a problem elsewhere as well. Most of Russia’s trading partner or those who want to use it as a transit route are shipping goods via containers, while Russia continues to export bulk cargoes via open rail cars.

            And unless that changes and Russia begins exporting finished products or other countries start to export bulk raw materials, neither of which is likely to happen anytime soon either on the north-south or the east-west routes Moscow has been promoting, this problem of cost from cars returning empty will remain a major problem, even if it seldom attracts much attention.