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India and the European Union share a vibrant Strategic Partnership which has been witnessing strong growth with wider and deeper co-operation in Political and Strategic, Trade and Commerce, Climate and Sustainability, Digital and Technology aspects as well as people-to-people ties. The India-EU Leaders’ Meeting held in May last year set new milestones with the decision to resume trade talks and the launch of India-EU Connectivity Partnership. President of the European Commission Ursula Von Der Leyen was on two–day official visit to India where both sides reviewed the progress on various aspects of the relationship and further intensify the multifaceted partnership with EU.

Opportunities for stronger India-EU ties

  • The EU wants to pivot away from China. It recently signed a Comprehensive Agreement on Investment with China, which has drawn a lot of flak and its ratification has now been suspended because of diplomatic tensions.
  • The European Parliament remains overwhelmingly opposed to this deal after China imposed sanctions on some of its members, in response to the EU imposing sanctions against China for its treatment of the Uyghur Muslim minority in the Xinjiang region.
  • With the EU being India’s largest trading partner and the second-largest export destination, the economic logic of strong India-EU economic relations is self-evident.
  • The virtual summit saw India and the EU launching an ambitious “connectivity partnership” in digital, energy, transport, and people-to-people sectors, enabling the two to pursue sustainable joint projects in regions spanning from Africa, Central Asia to the wider Indo-Pacific.
  • Exports to EU: India has an untapped export potential of $39.9 billion in the EU and Western Europe. The top products with export potential include apparel, gems and jewellery, chemicals, machinery, automobile, pharmaceuticals and plastic.
  • India benefits from tariff preferences under the EU’s Generalized System of Preferences (GSP) for several of these products.
  • In fact, India is among the major beneficiaries of the EU’s GSP, with exports under the GSP valued at nearly $19.4 billion in 2019, accounting for nearly 37% of India’s merchandise exports to the EU.
  • New emerging world order after COVID-19: As EU seeks to move away from a global supply chain that is overly dependent on China, India can emerge as its most natural ally.

Concerns in India-EU ties

  • Stalled EU-India BTIA: It is being negotiated since 2007 and both sides have major differences on crucial issues such as: –
    • EU’s demands: significant duty cuts in automobiles, tax reduction on wines, spirits etc, a strong intellectual property regime, relaxation in India’s data localisation norms, protection to all its items with Geographical Indication etc.
    • India’s demands: ‘Data secure’ status (important for India’s IT sector); Ease norms on temporary movement of skilled workers, relaxation of Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) norms etc.
  • Trade imbalance: India accounts for only 1.9% of EU total trade in goods in 2019, well behind China (13.8%). Trade imbalance is expected to further increase with ratification of the European Union Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement, which will make Indian exports less competitive.
  • India’s perception of EU: It views EU primarily as a trade bloc, preferring bilateral partnerships with Member States for all political and security matters. This is evident from lack of substantive agreements on matters such as regional security and connectivity.
  • Brexit: It is unclear how U.K.’s withdrawal from EU will affect India’s relation with EU as whole.
  • Human Rights concerns of EU: The European Parliament was critical of both the Indian government’s decision to scrap Jammu and Kashmir’s special status in 2019 and the Citizenship (Amendment) Act.

Way Forward

  • To translate their common values into common action, EU and India in can work in third countries to consolidate democratic processes and build capacities of transitioning regimes through strengthening electoral and parliamentary institutions.
  • EU can collaborate with India to facilitate connectivity and infrastructure projects in third countries, particularly smaller states in South Asia that often fall prey to power politics and fiscal instability resulting from China’s loans and political influence as part of its BRI.
  • Thus, as highlighted by EU strategy on India, adopted in 2018, India EU should take their relations beyond “trade lens”, recognizing their important geopolitical, strategic convergences