India’s trade and economic ties with the EU are set to strengthen

Source: The post is based on the article “India’s trade and economic ties with the EU are set to strengthen” published in the Livemint on 18th May 2023.

Syllabus: GS – 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests..

Relevance: About India – EU trade and economic ties.

News: In 2022, India and the EU economies celebrated 60 years of their relationship with the relaunch of talks on a bilateral trade agreement. The latest Brussels visit of the Union Minister for Commerce and Industry has added momentum to the negotiations.

About India-EU Goods and services trade

India is one of the world’s fastest-growing economies, so it offers EU investors an attractive alternative market to China.

-The EU is India’s third largest trading partner, accounting for 10.8% of India’s total trade in goods. In the last decade, trade in goods between the two economies rise by about 30%. The EU is a key export market for India.

India is the EU’s 10th largest trading partner, accounting for 2.1% of the EU’s total trade in goods. But this is well behind China’s 16.2% and the US’s 14.7%.

-Trade in services between India and the EU was around €30.4 billion in 2020.

-India has a positive trade balance with EU in many categories like agri-food products.

-Foreign investment from the EU to India has increased over the years. Over 6,000 European companies are present in India, which has led to significant job creation in the country.

What is the potential of India – EU trade and economic ties?

-The India-EU Trade and Technology Council (TTC) could serve as a platform to address some of the issues between India and the EU.

-Indian companies have vast potential to enhance exports and diversify the export basket. India could develop successful business partnerships, enhance exports and attract investment from the EU.

-India and the EU are participating in trade discussions in multiple forums, including the World Trade Organization (WTO) and G20. India – EU collaboration can make trade more inclusive and growth-oriented for developing countries, building resilient global value chains (GVCs), integrating micro, small and medium enterprises (MSMEs) in global supply chains by using digital platforms, logistics for trade, and WTO reforms.

-India and the EU have already agreed to work together on common priorities covering issues like its dispute resolution mechanism, subsidies on agriculture and fisheries, and an e-commerce moratorium. Both sides recognize the need to build on their common goals to pursue consensus-based solutions. This will support livelihoods and nutrition security for millions in India and other developing countries.

-There is scope for attracting investment in the logistics sector with PM Gati Shakti and the National Logistics Policy of 2022.

What are the challenges in the India – EU trade and economic ties?

EU has raised high-tariff-related concerns in sectors like dairy, alcoholic beverages and automobiles and auto components from India. On the other hand, the EU’s carbon tax is a cause of worry for India.

India and the EU have several other issues, like the content of an investment agreement, intellectual property rights and tackling climate change challenges.

What needs to be done to enhance India – EU trade and economic ties further?

India and the EU’s bilateral trade and investment flows can be enhanced through targeted interventions and collaborations. Such as, a) Creating joint-capacity building programmes for supporting MSMEs integration with GVCs, b) Support to startups in each other’s market, c) Conducting joint research, innovation and skilling programmes, d) Ensuring collaboration and joint projects on sustainable food systems, etc.

To address issues related to technical standards and the mobility of professionals, collaboration between regulatory bodies and mutual recognition agreements is essential.

India should explore the scope for collaborations to attract more tourists from the EU, enhance exports of organic products and traditional medicine such as organic food, Yoga and Ayurveda.