India must rejuvenate business ties with the EU
The 14th summit, which begins today, is a chance to restart the trade and investment negotiations
The 14th India-EU summit in Delhi has the potential to rejuvenate bilateral ties and to provide a new direction to free-trade agreement (FTA) negotiations. The EU is still one of the biggest economies in the world. It has high levels of productivity and fairly high per capita incomes. The Eurozone economic growth forecast for 2017 is 2.2%, the fastest in 10 years. This may be good news for India. With more than $100 billion trade in goods and services, the EU is India’s biggest trading partner. Compared to a huge trade deficit with China, India-EU trade is balanced. In the last 15 years, FDI from EU member states in India has been higher than investments from the US, Japan, China and Russia combined.
Following the launch of the EU-India Strategic Partnership in 2004, the joint action plan in 2005 and negotiations on a Broad-based Trade and Investment Agreement (BTIA) in 2007, much enthusiasm was expressed on both sides. Between 2009 and 2015, however, the relationship somehow lost momentum. Many factors including a deadlock in BTIA negotiations, crises in some euro area economies, a policy paralysis in India during UPA II and the Modi government’s initial focus on the US and Asia contributed to this situation. Things are, however, beginning to change. After realising that Europeans could contribute significantly to the NDA’s domestic economic agenda, the prime minister has visited Belgium, France, Germany, Ireland, Netherlands, Portugal, Spain, Switzerland and the UK. The Indo-French Rafale deal has deepened strategic engagement. After a gap of four years, the 13th India-EU summit was also held last year and resulted in an agreed Agenda for Action 2020.
The 14th summit could be an opportunity to at least restart BTIA negotiations. After 12 rounds, negotiations were suspended in 2013 due to ‘mismatch between level of ambitions and expectations’. The negotiations will also be affected by the final outcome of EU-UK Brexit deal. In these circumstances, it is unlikely that India-EU FTA will be ready for implementation in the next two-three years. However, restarting negotiations will have a positive political signal and will impact overall investment climate.
The summit should focus be on issues where cooperation is already happening and concrete results are possible. These include renewable energy, counter-terrorism, migration, urbanisation, education exchanges and joint development projects in South Asia and Africa. The EU has significant capacities to deal with issues concerning global governance, climate change and the 2030 Agenda for sustainable development. India must utilise these capacities through bilateral talks.