India and the EU May03

India and Europe are linked by half a century of common values that unite the two regions as the world’s largest democratic state and the largest democratic union of independent states, respectively. India has more registered electors than the EU’s entire population and yet it can boast free and fair elections for five decades, a free press, an independent judiciary, a non-political army and a commitment to remain a secular state to sustain democracy.


India was the first country outside the EU to establish its embassy in Brussels in 1962 to represent India vis-à-vis the European Community. The benefit of this early association was limited, owing to India’s economic policy of focusing on internal market orientation of import substitution. However, there was greater success on the political front as India led the group of non-aligned nations and collaborated effectively with the EU in the UN and the Middle East and in developing regional trade links throughout Asia through ASEAN.


India’s balance of payments crisis in the summer of 1991 exposed the weakness of its economy. India had no choice but to open its economy to privatisation and competition. It had to roll back the frontiers of the state and introduce economic liberalisation that led to GDP growth of 6.5 per cent per annum for the period 1992-2001. The tenth five-year plan for 2002-2007 estimates annual economic growth at an average of 8 per cent.


25 per cent  of India’s exports are to the EU whilst only 1.3 per cent of EU exports go to India. India-EU trade, in both directions, could be substantially improved if agreements are reached on bilateral trade conditions e.g. quality standards, social and environmental welfare of workers, reduction of customs duties, quota limitations, sluggish bureaucracy and poor infrastructure. Overall, India attracts less direct foreign investment than China. Despite India's linguistic and social advantages, foreign investors (especially US multinationals) prefer to manufacture in China. India must address this problem!


India must dismantle the jungle of bureaucracy that cripples its economy to gain the advantage from China. Its bureaucracy devalues labour, wastes financial resources, breeds corruption and discourages domestic and foreign investors. Privatisation of state owned companies, use of Information Communication Technology (ICT) and electronic communication for all government and private business, the opening of transport infrastructure to domestic and foreign private investment and outsourcing federal and state government services would unleash resources, human and financial, that would energise the Indian economy by creating a huge demand for goods and labour. Industry and business will then seize the opportunities to invest to produce goods and offer services to a population with increasing disposable incomes.


In June 2004, the EU will expand to be a union of 25 countries with a population of 450 million. How can India expand its trade with the EU to exploit the markets of the less developed accession countries that will need a wide range of goods and services?

India has so far lacked effective access to important Asian multilateral forums like the Asia-Pacific Economic Co-operation (APEC) and the Asia-Europe Summit Meetings (ASEM) that play an increasingly important role in co-ordinating national policies in the age of globalisation. Pro-active professional dialogue at these forums, political meetings between India-EU Parliamentary Industry Committees and technical meetings with relevant European Commission officials can be the starting points for increasing the co-operation between India and Europe.


The Indian Chamber of Industry and Commerce, like the American Chamber of Commerce, should establish in Brussels a link with the European Parliament that can act as the venue for contact, dialogue, trade negotiation and identification of entrepreneurs interested in India-EU trade. This link will offer an opportunity to Indian businessmen to meet European Parliamentarians, European industrialists and European Commission officials. Such a forum will enhance India’s trade with the EU. It would also allow Indian businessmen in the UK to explore investment possibilities in the EU. I shall be delighted to be a co-founder of such a project.