Opinion
India’s trade and economic ties with the EU are set to strengthen
Summary
Piyush Goyal’s Brussels visit covers a range of issues with high potential to boost bilateral relationsIndia and the EU, as two large democratic areas , have a long history of shared values, political exchanges and common interests. In 2022, the two economies celebrated 60 years of their relationship with the relaunch of talks on a bilateral trade agreement. Both sides have agreed to fast-track talks with a target of concluding a trade deal by the end of 2023. The latest Brussels visit of Union minister for commerce and industry Piyush Goyal has added momentum to the negotiations and provided India a platform to work with the EU to resolve sensitive issues, including market access barriers. It will help build a consensus for a balanced and meaningful trade agreement, which will enhance our exports and lead to economic growth and employment on both sides. As one of the world’s fastest growing economies, India offers EU investors an attractive alternative market to China.
The EU is India’s third largest trading partner, accounting for 10.8% (around €88 billion) of our total trade in goods. The last decade saw trade in goods between the two economies rise by about 30%. The EU is a key export market for us, and in many categories like agri-food products, India has a positive trade balance with it. Food exports from India to the EU have increased from $2.65 billion in 2011 to $3.01 billion in 2021, while food imports from the EU to India have increased from about $410 million in 2011 to some $920 million in 2021. Trade in services between India and the EU was around €30.4 billion in 2020. Foreign investment from the EU to India has increased over the years, with the EU foreign investment stock in India at around €87.3 billion in 2020. Over 6,000 European companies are present in India, which has led to significant job creation in the country.
India is the EU’s 10th largest trading partner, accounting for 2.1% of the EU’s total trade in goods, but this is well behind China’s 16.2% and the US’s 14.7%. Our companies have vast potential to enhance exports and diversify the export basket. The minister’s EU visit provides an opportunity for business-to-business interactions across a wide range of sectors, including food and beverages, technology, chemicals, automobiles and auto-components, textile chemicals, metals and steel. We could develop successful business partnerships, enhance exports and attract investment from the EU. The visit also focuses on trade and investment issues. While EU businesses have raised high-tariff related concerns in Indian sectors like dairy, alcoholic beverages and automobiles and auto-components, our businesses are worried about regulatory issues such as technical standards and the EU’s carbon tax.
There are differences in views between India and the EU over several issues, like the content of an investment agreement, intellectual property rights and tackling climate change challenges. The India-EU Trade and Technology Council (TTC) could serve as a platform to address some of these. The visit will help to build a consensus on how to jointly work on addressing the issues through the TTC and a trade agreement.
India and the EU are participating in trade discussions in multiple forums, including the World Trade Organization (WTO) and G20. In this context, the minister’s visit affords an opportunity to identify areas of common interest and for India to get EU support on its G20 priority areas, like making trade more inclusive and growth-oriented for developing countries, building resilient global value chains (GVCs), integrating micro, small and medium enterprises (MSMEs) in global supply chains by using digital platforms, logistics for trade, and WTO reforms. In the specific context of WTO reforms, India and the EU have already agreed to work together on common priorities covering issues like its dispute resolution mechanism, subsidies on agriculture and fisheries, and an e-commerce moratorium. Both sides recognize the need to build on their common goals to pursue consensus-based solutions that would support livelihoods and nutrition security for millions in India and other developing countries. If India and EU work together, they may be able to reach a consensus on many issues at the next WTO Ministerial Conference.
There are multiple areas where bilateral trade and investment flows can be enhanced through targeted interventions and collaborations. For example, joint-capacity building programmes for supporting MSMEs integration with GVCs; support to startups in each other’s market; joint research, innovation and skilling programmes; collaboration and joint projects on sustainable food systems will all help enhance bilateral trade and investment flows. Collaboration between regulatory bodies and mutual recognition agreements will help address several issues related to technical standards and the mobility of professionals. India may explore the scope for collaborations to attract more tourists from the EU, enhance exports of organic products and traditional medicine as organic food, Yoga and Ayurveda gain popularity in the EU. As India embarks upon creating a resilient and efficient logistics ecosystem and promoting seamless multimodal international transportation under the PM Gati Shakti and the National Logistics Policy of 2022, there is scope for attracting investment in this sector and learning from the best practices of the EU.
Arpita Mukherjee is a professor at the Indian Council for Research on International Economic Relations (ICRIER)
These are the author’s personal views.
