The recent visit of Indian Commerce Minister Goyal to France and Italy becomes highly significant to capitalise upon emerging opportunities in the rapidly changing global economic order.
In recent years, India has emerged as the preferred trade and investment destination for EU firms, given its rapid economic and technological rise in turbulent times when most countries still struggle to overcome their economic woes.
Indeed, Indian negotiators deserve compliments for their unrelenting efforts to take forward the stalled negotiations after a gap of eight years amid the multiplicity of complexities and divergent geo-political interests of participating in 27 sovereign countries as a single entity, the European Union. To illustrate, an FTA can technically be approved by the European Parliament, but the investment protection agreements must be ratified by the EU parliament and the parliaments of each member country.
To facilitate an expeditious conclusion of the deal, parallel but separate negotiations on contentious and complex issues, such as investment protection and geographical indications, are being carried out. Moreover, India-EU FTA is likely to be much more comprehensive compared to earlier trade deals recently signed by India with Australia and UAE, aiming to liberalise 94% of the trade in goods. It is also expected to have a separate chapter linking trade with sustainable development.
The fourth round of India-EU trade negotiations occurred on March 23 in Brussels. The fifth phase is scheduled to resume in mid-June with an ambitious timeline to conclude the negotiations by 2023.
India-EU Trade Dynamics
The EU is India’s third-largest trade partner, whereas India is the EU’s tenth-largest trade partner. In the last decade, India’s merchandised trade grew by 30%. During recent years, India’s trade with European Union has witnessed spectacular growth as its exports grew from $ 41 billion in 2020-21 to $ 67 billion during April- February 2022-23.
In contrast, imports rose from $ 40 billion to $ 54 billion during the same period. Interestingly, India had a trade deficit with the EU in 2018-19 that turned into a trade surplus of $ 13 billion during April- February 2022-23. India had a considerable positive trade balance with the Netherlands ($ 13 billion), Spain ($1.5 billion), and France ($ 1.5 billion). In contrast, it has a significant trade deficit with Germany ($5 billion) and Ireland ($2.5 billion) during April – February 2022-23.
India’s top exports destination in the EU includes the Netherlands, Belgium, Germany, Italy, France, Spain, and Poland, whereas its top import-sourcing countries include Germany, Belgium, France, Italy, Netherlands, Spain, and Sweden. India’s major export products to the EU are petroleum products, telecom instruments, iron and steel, precious and semi-precious stones, electric machinery, ready-made garments and textiles, pharmaceuticals, aluminium products, and organic chemicals, whereas its main imports from the EU include pearl, precious and semi-precious stones, industrial machinery for dairy, aircraft and spacecraft accessories, electronic components, electric machinery and equipment, medical and scientific instruments, residual chemicals and telecom instruments.
A Win-Win Trade Deal
Amid post-covid supply chain disruptions, armed conflict between Ukraine-Russia and trade tensions between the US-China and Australia-China, India has become a strategically significant partner to the EU, much beyond trade and investment. Moreover, consequent to the exit of the United Kingdom from the group, popularly known as Brexit, the EU is keen to find new trade partners for which India becomes a natural economic ally.
Moreover, India’s spectacularly neutral stand in the rapidly emerging multi-polar world significantly transformed its strategic position to play a crucial role in world trade and diplomacy. The India-EU FTA provides an a huge opportunity for EU firms to penetrate the world’s fastest-growing major economy, home to 1.4 billion people compared to 447 million people in the EU. Given India’s recent policy resolve to ‘Make-in-India’, collaboration in technology-intensive manufacturing and defence production has fast emerged as a key area of mutual synergy and immense investment opportunities.
Technological complementarities between the EU and India offer opportunities to collaborate in a range of high-tech goods, including machinery, pharmaceutical and IT research, as India seeks to achieve self-reliance and the businesses in the EU are in search of an alternative manufacturing location to China.
The India-EU Free Trade Agreement TA is likely to pave the way for enormous opportunities in trade and investment and forging strategic international partnerships at the world fora, making it a win-win deal.
Push for Free Trade Agreement with EU
The EU is India’s third-largest trade partner, whereas India is the EU’s tenth-largest trade partner. In the last decade, India’s merchandised trade grew by 30%. India’s top exports destination in the EU includes the Netherlands, Belgium, Germany, Italy, France, Spain, and Poland.