India & EU need to sign the trade agreement quickly. EU should remove its misconceptions of the Atmanirbhar program & stop equating India with its neighbour.
India-EU relations are at crossroads.
By Rajesh Mehta
The relationship of India with Europe is continuously changing & transforming for better. India was one of the first countries to establish diplomatic relations with Europe in the 1960’s. The agreement signed in 1994 took the bilateral relationship beyond cooperation in trade. Currently, India’s relationship with the EU is underutilized and has not reached even half of its full potential. Indian Foreign Minister S Jaishankar recently said that India, & EU should work together to shape global outcomes. He added that India is focussing on deep reforms & profound transformation & Europe is a natural partner when it comes to resources, technology & best practices .He said that “On their part, the Europeans need to appreciate the scale of this change and the opportunities that emerge from it whether it is access to electricity or drinking water, financial inclusion or low cost housing, we are talking of hundreds of millions being directly impacted in a short time.” He also said that “My focus today is on the larger relevance of the India-EU partnership for the world. We are each political and economic poles in an increasingly multi-polar world. Our ability to work together, therefore, can help shape global outcomes.” There is indeed a multi-dimensional nature of India-EU relationship which is consequential to shaping the global future.
It is widely believed that Indo-Pacific Region would decide the future of the world. Both India & EU need to work together to actively push for a rule based order. There is a need for the EU to promote Indo Pacific strategy to safeguard its interests in the region and also to be a strategic partner for its allies in Asia. France, Germany & Netherlands have released Indo-Pacific Strategies. More European countries are developing their strategies in the Indo-Pacific and thus more dialogue of India with European partners in the need of the hour.
The EU is at a stage where it wants to be more than a trading bloc, it sees greater participation for itself in global affairs, and is seeking out the right countries like India to partner with. The lack of global leadership during the pandemic left a vacuum that India and the EU can fill. The EU as a bloc of 27 countries is one of the largest (3rd) regional trading partners of India while India was EU’s 9th largest trading partner in 2018-19. India’s overall bilateral trade with the European Union for the period 2018-19 was 115.64 USD billion. The EU continued to be one of the largest sources of Foreign Direct Investment (FDI) in India with FDI valued at USD 609.84 billion from Apr 2000-March 2017.
The 15th Summit between India and the European Union (EU) was held in a virtual format on 15th July 2020. The Summit laid foundation for a deeper and more strategic cooperation between the European Union and India in times to come. Both the EU and India have agreed to deepen cooperation in areas like climate change, maritime security, digital economy, connectivity, research and innovation, water and climate action, and civil nuclear cooperation.PM Modi at the summit rightly said “After COVID-19, new economic problems emerged globally. For this, we feel the need for more cooperation among democratic nations. Today, both the health and prosperity of our citizens are facing challenges. There are different types of pressures on the rules-based international order. Thus, the India-EU partnership can play an important role in economic reconstruction, and in building human-centric and human-centric globalisation.”
According to Prime Minister, Shri Narendra Modi, ‘Atmanirbhar Bharat’ would be open to the world economies and it will integrate domestic production in India to global supply chains. EU can take the advantage of the Atmanirbhar program & move its supply chains from China to India. EU is India’s largest trading partner besides being the largest investor in India. India represented only 2% of the EU’s external trade, much below China (13.8%), indicating a tremendous untapped potential for the future of India-EU trade and investment. This can change in the post Covid world in which there will be a significant realignment of strategic and trade relations, a trend which is already underway. As investors of the EU search for places to invest and European businesses look for sourcing products away from China, India appears to be a suitable place. There is an urgent need for EU to understand that Atmanirbhar Program is not a protectionist move but a program that can strengthen the India-EU relations.
As the global supply chain transitions from its over-dependence on China, India emerges as the most natural ally for the EU in this regard. Furthermore, Europe’s dependence on China for life-saving drugs has been starkly evident during these pandemic times. An alliance of India’s vast manufacturing capacities coupled with European expertise in innovation can be a game changer for both parties. Similarly a strategic alliance in ICT could also benefit both the parties. India and the EU share a mutual interest in reciprocal mobility of talent. Highly qualified skilled workers could be integrated into Indian and EU-led innovation system industries and help maintain technology-based leadership and the sharing of best practices, internationalization of SMEs, and contributing to the global value chain.
India and the European Union are natural partners in climate change mitigation & green growth. The Jal Jeevan Mission, the Namami Gange Mission & The Solar Alliance are good schemes in this regard. India is in the middle of a huge afforestation program of huge magnitude. By 2021, India would abolish single use plastics & by 2030, India wants every car to be electric. India needs liberal technology, long term finances & green sector investments from Europe. If all this happens, this would make the world a greener planet.
“I strongly believe that digital transformation remains the single largest future opportunity for expanding collaboration between Europe and India.”, said Abhinav Kumar, Chief Marketing Officer for Global Markets at Tata Consultancy Services, who is based out of Brussels. He added, “Investing in advanced new technologies, like Artificial Intelligence, Cloud, IoT, Biotech, and Edge computing could create an incremental 14-15% uplift to the EU’s economy by 2030 – adding in an economic surplus the size of the entire UK economy today. In order to realize this, the largest enabling block (or stumbling block, if it is absent) would be access to high quality skills at scale. India currently accounts for 75% of the world’s talent pool in these digital technologies, hence, makes for a natural strategic partner for the EU in realizing the potential of this tremendous economic opportunity.”
Indian corporates are doing exceedingly well in Europe since we share similar democratic values & philosophies. The challenges that Indian firms face are because of not signing the trade deal, lack of information networks, financing problems & heterogeneous market. India is a sub-continent and like the EU, it is not a fully integrated market. It is not the same to do business in the state of Gujarat or in the state of Maharashtra.
Between 2007 & 2013, India & EU had 16 rounds of negotiations for FTA but could not seal it because of the EU’s insistence that India cut import on auto parts & wine and also strengthened the IPR regime and demanded more flexibility on data privacy. Hope these differences get resolved soon & FTA can be signed. An FTA would help Indian garment industry in a big way where our exporters have to pay export duties while our neighbours like Bangladesh & Pakistan do not have to pay any duty.
India-EU relations are at crossroads. It can transform for better which would not only be good for both parties concerned but can provide stability & growth which the world requires. Covid has thrown a lot of challenges but also open doors where both India & EU can collaborate. India & EU need to sign the trade agreement quickly. EU should remove its misconceptions of the Atmanirbhar program & stop equating India with its neighbour. India on its side needs to do a lot to improve the business climate & stop roadblocks for foreign companies entering or investing in India. The relationship with the EU should be given similar importance as we give to our relationship with the US. It was good to see India’s Foreign Secretary Harsh Vardhan Shringla concluding a successful tour to France, Germany & the United Kingdom. The visit did indicate that India is positioning itself as a trustworthy geopolitical partner. Both parties need to strengthen cooperation in the Indo Pacific Region and need to promote rules based multilateral order. Both parties need to work on the implementation of sustainable development goals, protecting the environment and combating climate change. Time has come for both parties to understand each other, trust each other and act in a way that it is good for the world.
(Rajesh Mehta is a Leading International Consultant & Columnist working on Market Entry, Innovation & Public Policy. Views expressed are personal.))