CNBC’s Inside India newsletter: Modi in Moscow. What’s new?

Indian Prime Minister Narendra Modi and Russian President Vladimir Putin sat down for tea at a country retreat outside Moscow earlier this week.

The meeting is likely to have set tempers to boiling point in Washington, D.C., where the NATO military alliance was convening at the same time.

While the 32 national leaders of the military alliance have largely kept their displeasure of the Moscow meeting private, the United States said it had raised concerns directly with India about its relationship with Russia. More broadly, the U.S. has threatened to sanction entities seen to be doing business with Russia to defund Putin’s onslaught against Kyiv.

While India has pushed back on any pressure, its relationship with Russia is not new.

Moscow has been India’s largest weapons supplier for historical reasons. Russia has also supplied India with nuclear fuel since the 1990s and lately has also been helping build nuclear reactors.

However, since the war in Ukraine began, oil imports from Russia have gone up. This week, trade data from the Russian government showed that grain imports by India had risen 22 times in the last harvesting season. Modi went further and thanked Putin for supporting Indian farmers with a stable and cheap fertilizer supply.

The underlying theme behind this trade reveals the motivations behind India’s transactional relationship with Russia.

Consumer inflation in India is high and volatile, which hurt Modi’s election performance last month, and the prime minister is doing his best to keep prices down for his citizens. Far from a strategic relationship, India is buying goods from the cheapest supplier.

Meanwhile, Indian imports of defensive equipment from the West have shot up, and the share of Russian weapons in India’s armed forces has been gradually declining since reaching a high in 2013.

“I think there is an understanding that as long as we keep seeing continued progress, deeper partnership between India and the United States — military and economic co-operation — we are willing to let India go a little bit further with Russia without necessarily invoking sanctions,” Rick Rossow, chair of U.S.-India policy studies at the Center for Strategic and International Studies, told CNBC.

“We’d like the optics to dial down a little bit, but overall, I don’t think we’re not going to sacrifice the relationship because of it.”

Even equity investors see through the relationship and have discounted the threat of retaliation against India.

“Does Modi see [Russia] as anything more than a bargaining counter? That I have difficulty imagining,” Mark Martyrossian, director at Aubrey Capital, told CNBC’s Inside India.

Martyrossian added that while some investors might change the way they see India — subscribing to the view that trading with Russia enables its war machine — it would not impact Indian companies on their investment potential. More than half of Aubrey’s Global Emerging Markets fund is invested in India.

Beyond trade, India also has stronger cultural ties to the West. Millions of Indians live in the U.S., Canada, and the United Kingdom and share many of their host nations’ values.

While it might appear India is behaving prudently in its trading relationship, a much-rumored long-term energy deal with Russia will likely come with a sting.

Just ask Germany what happens when a nation gets into long-term contracts for cheap energy from Russia.

Aside from the glitzy wedding this weekend, here’s what to expect in the week ahead:

July 12: India industrial output

July 15: China GDP, India wholesale inflation

July 16: Canada inflation

July 17: U.K. inflation

July 18: U.K. unemployment, ECB interest rate