India is one of the world’s largest economies, in the world, in terms of purchasing power parity. The country is the fastest-growing large economy, with annual GDP growth rates of around 7%, and on its way to reach the US$US 7.8 trillion economy mark by 2030. It is an important player in global economic governance. In 2017, the EU was India’s first trading partner, while India was the EU’s 10th largest trading partner. For India & Europe countries, there will be even greater opportunities if all 27 countries join in India free trade to contribute sustainable development. This would create one of largest single markets – US$1 trillion in spending and investment – offering great opportunities for both trade partner.
Why India Relations Important to EU?
India is of interest to every nations in the world…
- Population of 38 billion. With India has more than 50% of its population below the age of 25 and more than 65% below the age of 35, India has the biggest young workforce in the world;
- India poised to become third-largest consumer market
- Important player in Security & Counter – Terrorism;
- Rate of Development;
- Democratic holds them back in several fronts;
- Improved support from Government to Foreign investors;
- Culturally diverse.
Indo – EU Export & Import Trade Statistics
The position of India among the largest trade partners of the EU in 2019 – 2020. The four largest export partners of the EU were the United States (18 %), the United Kingdom (15 %), China (9 %) and Switzerland (7 %). The four largest import partners of the EU were China (19 %), the United States (12 %), the United Kingdom (10 %) and Russia (7 %). The below image has some more details. It shows that India (EUR 45.67 billion, 1.8 %) was the eleventh largest export partner of the EU, between Canada (EUR 38.3 billion, 1.8 %) and Mexico (EUR 37.6 billion, 1.8 %). In imports India (EUR 43.99 billion, 2.0 %) was the tenth largest partner of the EU, between South Korea (EUR 47.4 billion, 2.5 %) and Vietnam (EUR 34.4 billion, 1.8 %).
FDI Equity Inflow
EU foreign direct investment stocks in India cumulative total amounted to €88.486 billion from January 2000 to December 2019.
Huge potential between India & the EU to take economic partnership to next level through Connectivity
For both, the European Union (EU) and India, connectivity initiatives have emerged as a key driver of their respective developmental goals. In recent years, the EU and India have made significant investments in furthering connectivity initiatives in their respective neighbourhoods. Connectivity was also identified as an area of high potential for cooperation between the two partners in the EU’s strategy on India.
India’s approach towards connectivity is based on multi-modal development and infrastructure projects including rail and road links, energy cooperation, cross-border transits, financial assistance.
As India tries to push the infrastructure and connectivity development initiatives in the region, the EU can play a significant role. “Connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities; balanced ecological and environmental protection and preservation standards; transparent assessment of project costs; and skill and technology transfer to help long term running and maintenance of the assets”.
Asia will need to invest US$26 trillion over the 15-years from 2016 to 2030, or US$1.7 trillion per year” in its climate-adjusted infrastructure development. It is in this sector that the EU visualises itself as a suitable partner to help develop sustainable, comprehensive and rules-based connectivity. For instance, the EU in its “Connecting Europe and Asia: Building Blocks for an EU Strategy” proposed an initiative to connect “its well-developed Trans-European Network for Transport (TEN-T) framework with networks in Asia”. TEN-T is a multi-modal project under which a Europe-wide network of “railways lines, roads, inland waterways, maritime shipping routes, ports, airports and railway terminals have been established”. This integrated infrastructure would include 217,000 km of railways, 77,000 km of motorways, 42,000 km of inland waterways, 329 key ports and 320 airports. The Core Network is expected to be completed by 2030 and the Comprehensive Network by 2050. The strategy on connectivity suggests that the EU could offer its expertise and technical knowledge to its partners to map their integrated transportation systems, and further fund the infrastructure development plans, wherever appropriate.
The European Investment Bank and European Bank for Reconstruction and Development have, in the past few years, expanded their lending to include infrastructural and connectivity initiatives. The idea now is to expand EU’s cooperation with ADB and Asian Infrastructure Investment Bank (AIIB), and strengthen its relations with the World Bank and the International Monetary Fund (IMF). The EU wants to enhance its efforts in economic diplomacy and “intends to support platforms for matching European and Asian businesses, with a focus on SMEs and envisages creating a Business Advisory Group for Euro-Asian connectivity”
Prosperity through Sustainable Modernisation
An enhanced EU-India partnership on sustainable modernisation should contribute to deepening the existing relationship and foster investment and trade, while accelerating India’s move up the value chain; its research and technological development; resource efficiency and green growth, expansion of the tax base; and fostering of entrepreneurship. India’s internal policies and priorities will have a huge impact on international action on climate change; global energy security; resource efficiency; 2030 Agenda implementation; environmental challenges; disaster risk reduction; ocean governance, including sustainable fisheries and blue economy; and the protection of global common goods. The EU should project its dynamic bilateral cooperation on modernisation to the global stage, thereby engaging more actively with India on these issues to secure an effective global approach.
- Consolidating the modernisation partnership;
- Closer coordination on global challenges;
- Realising the untapped potential of the trade and investment relationship;
- Investing in talent and innovation
EU Connectivity Initiative in India
In the next multi-annual budget for 2021-2027, the European Commission has proposed to increase the budget of EU’s external action to €123 billion. Internal and regional connectivity has emerged as central to Indian policy not only in terms of expanding its internal growth but also to increase its trade and role in the region and beyond. By collaborating with India in its growth story and in its connectivity initiatives, EU can emerge as a crucial partner. So far, its relations with India has been identified with economic and trade cooperation with the strategic aspect of the partnership remaining dormant. There is an untapped potential in sustainable connectivity between India and EU and it raises the possibility of increased cooperation between the two. The EU has expressed its readiness to engage with India as is evident from its strategy on India released in 2018. On connectivity, the strategy notes that “connectivity should be sustainable, comprehensive and rules-based… and be environmentally, economically, socially, and fiscally sustainable…while respecting international standards”. For the EU and India to jointly undertake projects, both partners need to increase their strategic trust and compliment it with increased investments. The improved dialogue between the two symbolises the growing synergies in the promotion of rule-based international order, sustainable connectivity and transparency in the investments. Keeping in mind India’s changing foreign policy and its pragmatic approach towards connectivity issues, the time is right for the EU to align its interests closely to India’s ambitions.
Dr. P. Sekhar
Chairman, Unleashing India Global Smart City Panel & MTGF