Yeltsin said Russia would provide cryogenic engines and space technologies for India`s space program as part of a $350 million agreement between the Indian Space Agency (ISRO) and the Russian space agency Glavkosmos, although the United States has imposed sanctions against both organizations. In addition, Yeltsin expressed strong support for India`s attitude towards Kashmir. A defence cooperation agreement aimed to ensure the continued supply of Russian weapons and spare parts to meet the requirements of the Indian army and to promote the joint production of defence equipment. Bilateral trade, which had declined considerably between 1990 and 1992, was to be revived after the settlement of the New Delhi debt dispute with Moscow and the May 1992 decision to abandon the 1978 Ruupie and ruble trade agreement in favour of the use of the strong currency. In 1993, New Delhi and Moscow worked to redefine their relations after the Cold War. During Russian President Boris Yeltsin`s visit to India in January 1993, the two countries signed agreements that marked a new emphasis on economic cooperation in bilateral relations. The 1971 treaty was replaced by the new Treaty on Friendship and Cooperation, dropping the security clauses that targeted the United States and China during the Cold War. If the supply of defence-related products were to be considered, the Soviets would have a favourable trade balance, financed by Russian loans. But it was manageable until India switched to a flexible exchange rate in 1986. While Rube`s value was linked to a basket of 16 major currencies, the price of the ruble continued to be managed. Not surprisingly, the rupees devalued, giving India an export advantage. But he also fell against the ruble.
On these two points, Russia will therefore benefit from a relaunch of the trade agreement on the rupees. What about India? There are two small positives and a big minus. The first plus is that, since the price of the dollar`s shadow remains higher than the official price, any major import that switches from payment in dollars to rupees is a gain. The second is that while Rube is the means of trade with Russia, there is some seignorage for India.11 The least results from the overvaluation of the rupees against the ruble, which favours significant imports from Russia by India as well as the distraction of Indian exports from the world market to Russia.