Trade Ties Background

India being the largest and fastest growing economies in the world is one of the key participants in the overall administration of the global economy. India is already a big trade and investment partner for the European Union and has the potential to become even more so. Since the signing of the strategic partnership in 2004, which prompted both parties to strengthen and increase their collaboration through summits, talks, and high-level working groups, India’s relationship with the European Union (EU) has come a long way. Their relationship has changed from one of development aid to one of development partnership, with their economic relationship emerging as the foundation of their relationship.

India-EU Trade snapshot

• The EU is India’s third largest trading partner, accounting for €88 billion worth of trade in goods in 2021 or 10.8% of total Indian trade, after the USA (11.6%) and China (11.4%).
• The EU is the second-largest destination for Indian exports (14.9% of the total) after the USA (18.1%), while China only ranks fourth (5.8%).
• India is the EU’s 10th largest trading partner, accounting for 2.1% of EU total trade in goods in 2021, well behind China (16.2%), the USA (14.7%) or the UK (10%).
• Trade in goods between the EU and India increased by about 30% in the last decade.
• Trade in services between the EU and India reached €30.4 billion in 2020.
• The EU’s share in foreign investment stock in India reached €87.3 billion in 2020, up from €63.7 billion in 2017, making the EU a leading foreign investor in India. This is significant but way below EU foreign investment stocks in China (€201.2 billion) or Brazil (€263.4 billion).
• Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors.

Leveraging Russia-Ukraine crisis

• $2.3 billion | India-Ukraine bilateral trade so far in FY22
• This includes $372 million exports and about $2 billion imports
• $2.5 billion | India-Ukraine bilateral trade in FY21

India-Russia bilateral trade

• $9.4 billion | India-Russia bilateral trade so far in FY22
• This includes $2.55 billion exports and $6.9 billion imports
• $8.1 billion | India-Russia bilateral trade in FY21
• The global geopolitical script has changed over the last few months. The Russian invasion of Ukraine, posterior trade and profitable proscription on Russia by the US and European Union, the upending of the liberal multinational order and the rise of an assertive China has led both India and European Union to realize that a substantial engagement is imperative for both.
• Also, given India’s growing indigenous and transnational applicability, it’s pivotal for the European Union to renew its focus on developing the profitable, political and defense cooperation. Also, since 2016, both India and the EU, through their colorful common statements and enterprise, have boosted their cooperation in pivotal strategic areas, including climate change, sustainable development, and military- to-military dialogue. India is an important participant in this regard due to its sustained profitable growth and request size.
• The Ukraine extremity created an urgency to engage with India as part of Europe’s Indo- Pacific strategy for Cooperation. The Russian irruption of Ukraine in Europe the EU has started looking at India as a feasible volition for global force chains and as a technology mate.

The Way Forward

• India, Europe, and Indo-Pacific: In order to strengthen its deterrent powers or quicken its own economic and technical transition, India will require Europe more than it has in recent years.
• India must deepen its all-round partnership with Europe, build a shared vision of an altered geopolitical landscape and encourage Europe to play a greater role in the Indo-Pacific.
• The two can mobilize massive economic resources for sustainable development of regional infrastructure, wield political influence and leverage their soft power to spur the growth of the Indo-Pacific discourse further.

Focused synergies
Possible Areas of Cooperation with European Union

• Access to European capital and market
• European Union views India as an important partner for resolving global issues, including climate change, food security, energy and international peace and security.
• Having built up a significant engagement with Russia over the decades, both India and European Union are under pressure to disentangle from the Russian connection.
• Making India an attractive new destination for European capital, who is now under pressure to reduce its exposure to Russian and Chinese markets, should be the highest priority for India.

Defense Sector

• European Union countries like France has a critical role in making a success of India’s ambitious current plans to expand domestic production of weapons with greater participation of private and foreign capital.
• France is also a preferred partner in the Indo-Pacific, even more so now with a blueprint for cooperation in the form of a Joint Strategic Vision for cooperation in the Indian Ocean Region concluded by both countries in 2018.

Energy Sector

• As for Energy sector is concerned, European Union is looking for diversifying its sources of Oil and gas from Russia. India should leverage this opportunity to forge new partnership in renewable energy and reducing dependence on fossil fuels.
• The areas of focus should be offshore wind, green hydrogen, and solar power.

Technology and Innovation

• It has become pertinent for India to diversify its Technology partnership. European Union can become a trusted partner in India’s quest to achieve technology autonomy.
• The recently curated EU-India Trade and Technology Council can act as a precursor for creating transformational ecosystem in Technology and Innovation space for both the partners.
• Apart for these focus sectors India-European Union through resumption of FTA talks are moving towards establishing strong relationships in Start-up ecosystem, academic collaboration, rural communities’ development, urban planning, high skill migration etc.

Conclusion

India’s position in the Post-COVID-19 world order and post-Ukraine war world will be a new and crucial one, in which major powers will view India as a trustworthy ally to help maintain supplies and security of the sea lanes. This is demonstrated by the fact that India and Europe have chosen to engage at a time when the world is transitioning from the pandemic to a changed global order. In the grand scheme of things, Europe has moved from the margins to the Centre of India’s foreign and security policies. The crisis in Ukraine has intensified the imperatives for deeper strategic cooperation between India and its European partners.