Close trade ties with France and Italy will promote Indian exports

Photo: Mint
Photo: Mint


The support of Rome and Paris could help conclude an India-EU trade deal that’s headed for a fifth round of talks this June

The visit of Union minister of commerce and industry Piyush Goyal to Paris and Rome on 11-13 April has come at a crucial moment. India currently holds the G20 presidency and has successfully completed its fourth round of negotiations with the EU for a free trade agreement (FTA). India’s trade with Italy and France has seen an upward trend after a dip during the covid pandemic. Bilateral merchandise trade between India and Italy was $13.23 billion in 2021-22, while the India-France bilateral trade in goods (excluding military equipment) was only a little less that year, at $12.42 billion. Top exports from India to Italy included iron and steel, products made of these, aluminium and its products, petroleum products and cotton ready-made garments. Our top exports to France were petroleum products, electric machinery and equipment, drug formulations, cotton ready-made garments (including accessories) and aircraft, spacecraft and parts. India had a positive trade balance in goods with both these European countries. In the services sector, the India-Italy bilateral trade was $952 million in 2020-21, while that with France was $4.63 billion. India’s services exports to the two markets include telecommunication services, IT and IT-enabled services, business services and transport services.

While trade is growing, there is room for much more growth, especially at a time when Italian and French companies are trying to build resilient supply chains and are looking at the large and growing Indian market. There is scope for diversifying our export baskets in goods and services further, and for collaborations in areas like research and development, technology-based services such as health-tech and edutech, and the startup and audio-visual sectors. India can be a low-cost post-production hub for Italian and French audio-visual companies. The large and growing Indian market offers tremendous opportunities for manufacturers from Italy and France to explore and test-market their products. There is scope for business partnerships in sectors like textiles, leather products, engineering goods, automobiles and auto-components and food and beverages, to name a few.

India’s strengths in organic production and traditional medicine and practices like Yoga and Ayurveda can be showcased to Italian and French consumers. To help tap cross-border business-to-business (B2B) potential, the minister’s visit includes a series of meetings with leaders and top CEOs of the two countries. This will help explore new business opportunities, understand concerns if any and strengthen our existing trade and investment ties. Over 130 Italian companies are either present in India or sourcing from here, or have partnerships with Indian companies. Well-known Italian companies that have invested in India include Fiat Auto, Heinz Italia, Italcementi, Necchi Compressori, Perfetti, Lavazza, ENI, SAI, Isagro (Asia) Agrochemicals and Piaggio. The cumulative investment of Italian firms from April 2000 to December 2022 is placed at around $3.25 billion across sectors such as automobiles, trading, services, machinery and food processing. The India-Italy Strategic Partnership on Energy Transition launched during a PM-level bilateral meeting in October 2021 provides opportunities for further exploration of joint investments. France is the 11th largest foreign investor in India with a cumulative investment of $10.49 billion (April 2000 to December 2022), across sectors such as services, cement and gypsum products, air transport, petroleum and natural gas. Notable French companies present in India include Airbus Group, BNP Paribas, CWT, Pernod Ricard, Renault and Schneider Electric. Co-operation in the defence sector is a core component of the Indo-French strategic partnership, and India has recently allowed foreign direct investment in the defence sector.

India’s export target of $2 trillion of goods and services by 2030 set by the Union commerce ministry can be easily achieved if India diversifies its export baskets to key EU member countries, like France and Italy. The minister’s visit provides an opportunity to build mutually beneficial partnerships. India will get an opportunity to showcase its developments in areas like digital technology, logistics and e-commerce, and share information on incentive programmes like the government’s production-linked incentive scheme. Moreover, India’s focus on organic food and millets are aligned with the EU’s focus on a sustainable food system. Identification of skill requirements in the EU and joint skill development and language training programmes with France and Italy could help Indian professionals and skilled workers access the EU market. The visit can also facilitate greater sharing of information and collaboration across the three countries’ regulatory bodies.

Significantly, the support of Italy and France is essential in concluding a broad-based, balanced, and comprehensive trade agreement with the EU. The fourth round of FTA negotiations with the EU has seen progress in many areas, and the minister’s visit is expected to set the stage for a fifth round of FTA negotiations, due to be held in New Delhi from 19 June to 23 June 2023.

The bilateral merchandise trade between India and the EU reached $116.36 billion in 2021-22 , while the services trade was $43.07 billion. In the first 11 months of 2022-23, merchandise trade crossed $121 billion. An ambitious India-EU trade agreement will further boost trade and investment flows, encourage B2B collaborations, help diversify and secure supply chains, provide a stable operating environment for businesses, and create employment in both markets.

These are the author’s personal views.

Arpita Mukherjee is a professor at the Indian Council for Research on International Economic Relations (ICRIER).


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