The European Union

The European Union (EU), as a regional bloc, is India’s largest trading partner. 

  • The EU is India's third largest trading partner, accounting for €62,8 billion worth of trade in goods in 2020 or 11.1% of total Indian trade, after China (12%) and the US (11.7%).
  • The EU is the second-largest destination for Indian exports ( 14% of the total) after the USA.
  • India is the EU’s 10th largest trading partner, accounting for 1.8 % of EU total trade in goods in 2020 , well behind China (16.1),the USA (15.2%), and the UK (12.2 %).
  • Trade in goods between the EU and India increased by 72% in the last decade.
  • Trade in services between the EU and India reached €32.7 billion in 2020.
  • The EU's share in foreign investment inflows to India more than doubled from 8% to 18% in the last decade, making the EU the first foreign investor in India.
  • EU foreign direct investment stocks in India amounted to €75.8 billion in 2019 , which is significant but way below EU foreign investment stocks in China (€198.7 billion) or Brazil (€318.9 billion).
  • Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors.

The EU is a market with highly selective choices. It presents several challenges in the area of sanitary and phytosanitary standards and technical standards, complex systems of quotas and tariffs and trade remedial actions against Indian products. The EU’s practice of constantly evolving its sanitary and phytosanitary standards and procedures is a major challenge and raises the bar for exports from developing countries. While India’s merchandise exports in some sectors are very well integrated with the EU market, there is significant potential for growth in many of the employment creating sectors. There is also high potential for growth of exports in technology areas such as automobiles, auto components, engineering products and pharmaceuticals. Therefore, the EU continues to be an important market. India has been the beneficiary of the generalized system of preference (GSP) in some sectors. However, some of these sectors have now been excluded from the EU, GSP list adversely impacting India’s market access.

The EU is also a significant market for India’s information technology services, but India has not been able to adequately harness the potential because of the data security related constraints thrown up by EU regulations. While large Indian companies can respond to EU’s data security framework, smaller companies find it impossible to access the EU market. India’s skilled professionals find the EU regime for movement of natural persons for services delivery highly discomforting, and expensive. India’s services particularly in the IT and ITES sector have contributed to the competitiveness of several US businesses. A similar approach is available to the EU companies if these challenges are appropriately addressed. An India-EU Broad based Trade and Investment Agreement (BTIA) has been under negotiation for several years. India has made the most liberal offer so far made to any of its trading partners. The two sides have reached an understanding on many issues. However, some areas still remain outstanding. India is an emerging economy with several policy and legislative matters still under evolution. Therefore, India’s approach has been incremental rather than one off. The present state of the European economy is also a challenge in these negotiations.

Talks for a Free Trade Agreement (FTA) between the EU and India were started in 2007 and halted in 2013 due to difference in the level of ambition between the EU and India. The EU stays committed to functioning towards a bright, specific, and balanced agreement FTA with India that responds to each side's key interests and is a win-win.

The EU is India's largest trading partner with 12.5% of India's overall trade business between 2015 and 2016, ahead of China which is 10.8% and the United States with 9.3%. India is the EU's 9th largest trading partner with 2.4% of the EU's overall trade. Bilateral trade (in both goods & services) reached EUR115 billion in 2017. EU exports to India have grown from EUR24.2 billion in 2006 to EUR45.7 billion in 2018. India's exports to the EU also grew steadily from EUR22.6 billion in 2006 to EUR45.82 billion in 2018, with the largest sectors being engineering goods, pharmaceuticals, gems and jewellery, other manufactured goods and chemicals. Trade in services has also tripled between 2005 and 2016, reaching EUR28.9 billion. India is among the few nations in the world that run a surplus in services trade with the EU. Investment stocks from Europe to India reached EUR51.2 billion in 2015. France, Germany, and UK collectively represent a major part of EU-India trade

The EU continues dealing with India to make sure that such an agreement is economically sound, delivering real new market potential in all sectors to both sides, contains a strict rules-based component, and includes a comprehensive trade and sustainable development section, namely in order to deal with social and environmental impacts. Meanwhile, the EU is ready to think about starting talks on an investment protection agreement, which would significantly increase legal certainty for investors on both sides.

Non-Europeon Union Countries

India is negotiating a TEPA with the EFTA countries. In the next 5 years, our trade promotion activities will focus on Turkey, Visegrad-4 (Czech Republic, Hungary, Slovak Republic, Poland) and other non-EU countries in Europe, which will include encouraging product -specific participation in local trade fairs, in our traditional areas of strength such as textiles, pharmaceuticals, engineering, machinery, leather and organic chemicals. Increasingly, we will focus our trade promotion activities on new products with higher value addition particularly in the categories of defence equipment, medical equipment, construction material, processed foods, as also services.

These regions hold great potential for project exports from India in several sectors. Given the challenges of their demographics, high cost of manufacturing and lack of capital, local entrepreneurs would naturally look for potential collaborations with India. Studies on trade and investment in the region have concluded that there are several viable investment opportunities for Indian companies.

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