Bonhomie beyond convention

The EU and India celebrated the completion of 60 years of bilateral relations in 2022. The elevation of relationships from bilateral to strategic partnerships in recent years with more than 30 European nations has been a matter of significance.

The importance of the EU for India lies in its geopolitical significance. The rise of Chinese assertiveness and the growing China-Pakistan nexus gives an impetus to India to look for deepening ties with unconventional partners. Also, in recent times, an increasing tilt of Russia toward China has compelled India to look out for new partners. On the strategic front, many European nations like France and UK have military bases in the Indo-Pacific region (Djibouti and Diego Garcia), providing security in the Indian Ocean region. The economic prospects also necessitate a stronger tie with Europe. Europe also strongly supports India's ambition to reform international organisations including the WTO, UN, and NSG.

The EU is also important for India for its nuclear power requirements. France and the UK have efficient nuclear power technologies, which will help India to develop its nuclear power capacity. The defense sector is also a major reason to boost ties. To date, Russia has remained a major defense supplier, but with the ongoing Russia-Ukraine war, the diversification of supplies is a matter of necessity. A common threat perception from terrorism is also a uniting factor.

Historical connect

After WW-II, the dynamics between the European nations have undergone constant change. The establishment of the EU was a watershed moment. India was the first country to extend diplomatic relations with the European Economic Community in 1962. India–EU relations have progressively developed since then, evolving into a strategic partnership in the 21st century.

Ever since the beginning of diplomatic relations in 1962, India and the EU have closely worked on development partnerships. The EEC has been a crucial grouping in funding several developmental projects in India. India's Operation Flood is a fine example where the EEC extended its cooperation in 1970; and this forever changed India's dairy architecture. It was famously known as the 'White Revolution' which transformed India from a milk-deficient nation to the world's largest milk producer. India–EU trade incrementally increased from USD 1.638 billion in the 1960s and 1970s to USD 5.701 billion in 1980.

India and the EU, in 1993 and 1994, signed the Joint Political Statement and the Cooperation Agreement, respectively. These were the foundational agreements for bilateral relationships. However, the bilateral ties reached their climax in 2004 at the 5th India–EU summit when India and the EU became strategic partners.

The Indian government, in 2014, fostered deeper cooperation. There was an inauguration of the Europalia India Festival in 2013. In 2017, European Investment Bank (EIB) opened its first office for the South Asian Region in New Delhi. ‘India–EU Strategic Partnership: Roadmap to 2025’ was released along with the establishment of a High-level Dialogue on Trade and Investment (HLDTI) in 2020. The year 2021 saw the resumption of Free Trade Negotiations along with the inauguration of India–EU Maritime Security Dialogue. The Indo-Pacific region is the new epicenter for geopolitics as it is home to more than 60 per cent of the world's population. It also accounts for more than two-thirds of the global economic output.

Recent developments

For the first time in the history of their relationship, security issues were also included in the talks at the India-EU summit held on July 15, 2020. At the London G-7 Foreign and Development Ministers meet, India was invited along with Australia, South Korea, and New Zealand. The policy documents of the EU show the genuine interest of the region in India. For instance, in the released document ‘The Global Strategy’, the EU opined that the economic rise of Asia mandates having good relations with India and Japan. Also, in the ‘Strategy on India’ document, the EU acknowledged that the need of the hour is to develop good relations with India on an equal footing relationship.

The EU itself has committed to becoming carbon neutral by 2050. It has also joined, as a part of its adaptation strategy, the India-led Coalition for Disaster Resilient Infrastructure headquartered in Delhi. They also invited India to sign a treaty against the pandemic under the WHO's vaccine production programme. The EU also mobilised 100 million euros in support of India's effort to deal with the deadly wave of the COVID-19 pandemic. Both jointly promoted high-quality infrastructure projects in the Indo-Pacific as an alternative to the Chinese BRI.

On May 8, 2021, the India-EU economic partnership was launched, which will strengthen cooperation in different sectors, including transport, energy, and digital economy.

The EU announced its Indo–Pacific Strategy before the 16th India–EU summit in 2021, which highlights Europe's interest in the region coupled with its ambitions to counter its systemic rival. It aims to promote rules-based regional security architecture in the region by aligning with like-minded allies, and India lies at the centre of the EU's grand strategy.

The first maritime security dialogue was held between India and the EU in January 2021. A stronger interdependence between Europe and the Indo–Pacific in areas such as trade and investment can be a good move to alleviate European economies and help them achieve their ambitions of becoming a global power in the 21st century. A collaborative effort in the region should aim at promoting linkages and not entangling into economic dependencies and debt traps. The EU's Global Gateway initiative is Europe's method of building resilient connections with the world, where the EU attempts to promote linkages over debt traps.

Since 2014, the paradigm has shifted. The India-EU relationship has changed its equation from donor-recipient to broad-based cooperation on equal footing.

Multi-dimensional relations

To start with, the EU is India's third-largest trading partner. It accounted for 62.8 billion euros worth of trade in goods in 2020 (1 per cent), after China and the US. It is also the second-largest destination for Indian exports (14 per cent of the total), the first being the USA. With 1.8 per cent of EU’s total trade in goods in 2020, India is also the EU's 10th largest trading partner. India's exports to the EU are mainly in the sectors of chemicals, engineering goods, pharmaceuticals, gems, and jewelry. Approximately 6,000 European Union companies are said to operate in India.

India has been a beneficiary of preferential tariffs for its exports since the 1970s under the EU's Generalised System of Preferences (GSP). This mechanism reduces import duties for almost 66 per cent of product tariff lines. An investment facilitation mechanism was established for EU investments in India in 2017. This has shown a renewed focus by both countries on facilitating ease of doing business norms for EU investors in India. In addition, India and the EU have been working on a Broad-based Trade and Investment Agreement (BTIA) since 2007.

There have been thirty-one dialogue mechanisms under the bilateral strategic partnership covering a diverse range of issues. Nonetheless, India's trade regime and regulatory environment still remain comparatively restrictive.

India and the EU's Joint Action Plan of 2005 states that the European Commission has committed 2 billion euros (USD 2.4 billion) in development cooperation to India since 1976. Also, the Indian government decided to limit the number of international donors, changing the dynamics of development cooperation with the EU. The total EU assistance to India through the DCI was 450 million euros (USD 545 million) between 2007 and 2013. However, in 2014, the EU ended its Development Cooperation Instrument (DCI) with India.

There has been a change in the contours of relations since 2014 from the donor-recipient paradigm to a regime of cooperation on equal footing. The first is the combining of loans from international financial institutions and EU grants for developmental needs. There is a combined DCI and Asian Investment Facility portfolio of 180 million euros (USD 218 million). The commitments are over the period of 2014-2020. The second is the infrastructure development loan, which was provided for three different metro projects in India – Lucknow, Pune, and Bengaluru by the European Investment Bank (EIB). Third, the key areas of development cooperation have been the education and science and technology sectors. Erasmus Mundus' funding for higher education, of which India is the largest recipient, is also a highlight.

Conclusion

The uncertain and inward-looking US policy outlook and the rise of an assertive China in the new world order have led both India and the EU to realise that a substantive engagement is the need of the hour. Both sides' negotiators must look beyond the multiple differences to focus on the complementarities. An intensified dialogue and deliberations, along with a realignment of trade policies in the world post-pandemic, provide an opportunity for both parties to transform their economic ties into a robust strategic partnership and increase prospects of collaboration. A balanced, ambitious, comprehensive free trade agreement, along with negotiations for a stand-alone investment protection agreement, can go a long way in cementing stronger ties ahead.

The writer is PhD Scholar in Political Science and International Politics. Views expressed are personal