The recently concluded EUIndia Summit laid foundations for a deeper and more strategic cooperation between the European Union and India in times to come. Though there was no sign of an FTA between the EU and India in the immediate future and no condemnation of China, there still were a lot of things to cheer about.
Both the EU and India have agreed to deepen cooperation in areas like climate change, maritime security, digital economy, connectivity, research and innovation, water and climate action, and civil nuclear cooperation. This agreement can lead to plenty of new possibilities. India can play a role in the EU’s Climate-Neutral Plan and vaccine development, for example. Moreover, disruptions may happen in Global Value Chains (GVC) post-Covid, giving India an opportunity to evolve from a country that is barely integrated into any GVC to a magnet of potential investments by partnering with the EU. The “China factor” is important in this context for India to reduce its reliance on imports from China (India’s trade deficit with China was $57 billion in 2019) and to provide the EU with an alternative trade and investment partner. India will do well with international capital investment flows and technology transfer for fostering local innovation and skills. The Ambassador of Denmark to India, Freddy Svane, said, “Geopolitics is ever-demanding and the well-known global order that has brought peace and prosperity is under constant threat. Countries are trying to protect their interests. The need for new ties is at its highest. Our challenges are not becoming less — whether it’s climate change or trade. Nowadays, development must be the guiding principle. The recent IndiaEU summit de facto set a new standard for next-generation international cooperation. EU and India are the most relevant strategic partners, if we want a better and more sustainable future. Denmark is happy to bring its skills to renewable energy and green transformation. It will generate many jobs and skills in India. By combining skills and scale we will bring about the speed needed. India’s future and prosperity call for international cooperation, including free trade. Together, EU and India will be the anchor of stability.”
EU is India’s largest trading partner. In 2019 alone, trade in goods accounted for $100 billion (or 11.1% of total Indian trade). The EU is also one of the largest investors in India with a cumulative investment of around $86 billion (as of 2018), which is significant – but still well below the $220 billion invested in China. Additionally, trade in services between the EU and India has increased rapidly from $28 billion in 2015 to $37 billion in 2018. However, India represented only 2% of EU’s external trade, well behind China (13.8%), indicating a tremendous untapped potential for the future of India-EU trade and investment.
“The EU-India Summit has been a great success, offering more cooperation opportunities between Europe and India. This is duly reflected in the broad and ambitious Roadmap 2025 which was adopted,” said Tania Friederichs, Head of Research & Innovation Section at the EU Delegation to India. “Increased efforts on research and innovation will be necessary to green the economy, create a human-centric digital world and a global response to the Covid-19 pandemic, in which finding new technological solutions jointly will be key in addressing common challenges. The fact that the EU and India share the same values helps a lot in engaging together on research and innovation,” she added.
World trade had been facing increased uncertainties due to the frailty of the multilateral trading system, even before Covid-19. Many countries were seen shifting towards bilateral/regional trade agreements with allies. Keeping this in mind, the India-EU cooperation would be timely — particularly in clean technology and other sustainability strategies — especially when compared to trade deals with other allies. India, for instance, has a people-to-people connectivity with the USA much more than the EU, but the current US administration has walked out of the Paris Accord and has followed an America-First strategy. Furthermore, since Vietnam, one of India’s main competitors, has ratified its FTA with the EU, Indian exporters could lose their markets in the EU to Vietnam.
However, there are certain challenges in the partnership too. One of the key demands that EU has made is for India to tighten its data security measures in order to qualify as a data-secure nation, as per its General Data Protection Regulation (GDPR) legislation, which lays down rules for the processing and free movement of personal data. Lack of recognition from EU as a data-secure country will serve as a blow for India-EU negotiations, since it would affect India’s IT and IT-enabled services. However, in 2019, the Indian government introduced its Personal Data Protection (PDP) Bill in the Parliament, supposedly at par with GDPR. Once PDP becomes an act, India can approach EU seeking datasecure status to reduce the compliance burden as well as provide gains for Indian technology industry. Moreover, the increasing risks of cyberattacks will require further regulation and compliance in cybersecurity; therefore, India-EU cooperation in data protection and cybersecurity may evolve ahead based on human rights and mutual values. Second, caught between the US and China, the EU is going through its own geopolitical challenges. The EU itself requires a coherent common foreign policy, which is presently more stifling rather than complementary for its 28 member states’ national foreign policies. For instance, the EU showed a divided stance on the Chinese Belt and Road Initiative (BRI). This decoupled foreign policy can play a pivotal role in the dynamics towards any serious partnership with India, since for many member states China still remains the main focus of engagement in Asia. Third, there is the question of India’s domestic reforms. Without completing its own key domestic reforms of land acquisition and labour, and without proper infrastructure and connectivity, India’s dream of wooing FDI and boost domestic manufacturing would remain elusive. To sum it up, it can be said that greater cooperation in economic terms, trade and investment flows may increase for India, while the EU may get access to a large market. Most importantly, both India and the EU are liberal and plural democracies, with natural reasons to cooperate. Currently, the EU and India need to work together and move from a tactical partnership to a strategic partnership more than ever before. In conclusion, the future of the EU and India would depend now on how much people-topeople engagement increases and how the geopolitics plays out globally.
Rajesh Mehta is a leading International Consultant and Policy Professional. Badri Narayanan Gopalakrishnan is Founder Director of Infinite Sum Modelling, and affiliate faculty member at University of Washington, Seattle. Deepika Wadhwa is an advisor to Infinite Sum Modelling in Seattle.
