+ India-EU FTA: The Road Ahead - CII Blog

In the year 1962, a newly independent India was the first country to establish diplomatic ties with the European Economic Community. With an aim to deepen their ties in trade and economy to establish a camaraderie of culture and people, the two regions signed a cooperation agreement in 1994. In 2004, this relationship evolved into a ‘Strategic Partnership’. 

The bilateral ties between India and the European Union (EU) have only strengthened over the years, and its impact and importance were acknowledged once again in 2019 with the renewal of the Strategic Partnership. In 2020, leaders from India and the EU held the 15th European Union-India Summit, wherein they sanctioned the ‘EU-India Strategic Partnership: A Roadmap to 2025’ as a common guideline to further strengthen the EU-India Strategic Partnership over the next five years.  The areas of cooperation discussed in this guide include:

  • Foreign Policy and Security Cooperation: With an aim of bolstering and expanding discussions on foreign policy and security issues of common interest where India and the EU can cooperate by establishing regular consultations between the two regions, focussing on strategic priorities, security issues, crisis management and peacekeeping.
  • Trade, Investment, Business and Economy: India and the EU aim to work towards balanced, ambitious and mutually beneficial trade and investment agreements along with strengthening mutual engagements through existing channels such as the EU-India Trade Sub-Commission.
  • Sustainable, Urban and Environment Friendly Development: Sustainability-driven investments will lead to a more inclusive recovery post-COVID for the entire world.  Both sides aim to work on increasing the engagement between the European Commission and India’s energy ministries to ensure implementation of the work programme of the EU – India Clean Energy and Climate Partnership. EU and Indian businesses can also greatly benefit on partnerships in smart and sustainable urbanisation, waste management and promotion of a circular economy.
  • Global Governance: Effective multilateralism, connectivity, cooperation in the Indian Ocean and the Pacific are what both the EU and India aim to jointly engage in, addressing global trade challenges in the WTO, to ensure the common objective of maintaining and strengthening a rules-based multilateral trading system.
  • People-to-People: The two regions have an agenda to explore cooperation in migration and mobility, establish dialogues in areas of employment and social policy and bolster cooperation in field of education and culture.

This roadmap highlighted the importance of global connectivity and the impact of cooperation on human lives, especially during the times of the pandemic. Since 2005, India and the EU have been strategic allies, and the COVID-19 epidemic presented not only challenges but also new opportunities which caused supply chains to further expand and diversify. 

In the time of global crisis during the pandemic, India provided essential medicines to many EU member states including France, Netherlands, UK, Germany and Italy. In a similar manner India was supported with critical medical equipment by EU member states during the second wave of the pandemic in the country. Countries like Netherlands and France donated relief material, including ventilators, test kits, concentrators and other medical equipment, apart from providing fiscal support to boost social welfare systems. 

Germany assisted India with 330,000 coronavirus testing kits and 600,000 pieces of personal protective equipment [PPEs] and provided short term loans worth € 460 million. Other countries including Italy, Denmark, Sweden and others have magnanimously contributed to this cause.

Moving forward, strengthening of ties will prove to beneficial to both India and the EU for a plethora of reasons. India being the largest democracy in the world is situated in the centre of the crucial Indo-Pacific area. The fastest-growing emerging economy with a projected yearly GDP growth rate of over 8%, India is the tenth-largest commercial partner of the EU in terms of trade. India’s second-largest commercial partner is the EU.There are around 6,000 European businesses in India, which provide 1.7 million direct jobs and 5 million indirect jobs to Indians.

After a gap of nine years, India and EU revived fresh talks on FTA, with a focus on industrial goods, agricultural tariffs and services, framework for investment, rules on intellectual property and competition, and commitments on sustainable development issues, such as environmental, social and labour rights, etc.

The proposed FTA will be economically vital for both the sides. From EU’s perspective, the free trade agreement (FTA) with India will support the EU’s aim of fostering partner countries’ integration into the world economy and will strengthen its role in global trade governance. 

From India’s perspective, it will boost the “Make in India” campaign, thereby assisting in establishing India as a global manufacturing hub. Furthermore, the FTA will strengthen India’s attempts to utilize its growing domestic economy and burgeoning middle class to support its rise as a global economic power.

The EU, being India’s largest trading partner and investor as well as its main source of technology transfer, will facilitate enhanced investment flows and technical cooperation. This would enable European companies to help India in its vision of developing 100 smart cities and other initiatives directed towards sustainable and resilient growth of the Indian economy. 

India and the EU have a common interest in each other’s security, prosperity and sustainable development, and together they can indeed contribute significantly towards ensuring a circular, sustainable and stable world.