With the balance of trade already tilted in its favour, India has the edge on bilateral ties with Italy. The latter's struggle for growth and burgeoning debt also means it sees India as a crucial bilateral partner of the future.
After taking over the highest office in Italy in June 2018, Guiseppe Conte spent the first few months meeting bureaucrats, diplomats and industrialists in his home country and restricting his overseas travel to within Europe. Which did not come as a surprise. What did however, was that he chose to visit India as the first country outside of the Eurozone as soon as end October--within four months of becoming the Prime Minister. It was a short one day trip but significant enough considering his predecessor Paolo Gentolini had just made a visit to India exactly a year ago in October 2017. That was the first time an Italian PM had set his foot in India in a decade.
Last week, Conte and India's Prime Minister Narendra Modi interacted again, this time virtually courtesy a bilateral summit that took stock of the progress in relations between the two countries since Conte's 2018 visit and deliberated on the way forward. The two countries ended up signing 15 agreements covering trade and investment, shipbuilding and energy, and unveiled a broad-ranging action plan to enhance their partnership by cooperating on connectivity, climate change and counter-terrorism. It included a memorandum of understanding between Italy's Cassa Depositi e Prestiti SpA and India's National Investment and Infrastructure Fund to promote co-financing, two MoUs between Fincantieri and Cochin Shipyard Limited covering design, shipbuilding and manufacturing, two agreements between Snam and Adani Entreprises to promote energy transition and an MoU between Snam and Indian Oil Corporation to cooperate on gas infrastructure development.
“The focus was on economic ties and Italy is very keen to diversify its supply chains and its outgoing investments, [and] to have a more substantive economic partnership with India,” said Sandeep Chakravorty, secretary (Europe West) in the external affairs ministry.
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The Indo-Italian bilateral relationship is steeped in history and has been strong for decades. With bilateral trade worth 9.52 billion Euros in 2019, Italy is currently India's fifth largest trading partner in the EU. Since the 1980s, India enjoys a trade surplus with Italy but it isnt an isolated case--France, Spain and Netherlands are also on that list. From an investment perspective, it is skewed in favour of Italy. There are over 600 companies in India from the land of Fiat, Ferrari, Armani and Versace that have cumulatively invested around $ 3 billion in the country in the last two decades.
In outright terms as well Italy is no pygmy as an economy. It is the eighth largest economy in the world and the third largest in the Eurozone after Germany and France with a GDP of $1.86 trillion. It is also the world's sixth-. largest manufacturing nation, dominated by small and medium enterprises clustered in many industrial districts. Characterised by the export of niche market and luxury products, Italy is the eighth largest exporter globally.
Yet, it finds itself in a peculiar position right now with its economy struggling for growth--its GDP declined by 0.3 percent in pre-pandemic 2019, while at the same time it is burdened with debt--nearly 135 percent of its GDP in 2019 which is expected to surge to 160 percent this year. That means Italy cannot even spend its way out of the recession. This has only made it more dependent with increased trade and investment from outside and in India it sees its biggest opportunity.
Dutch Prime Minister Mark Rutte, German Chancellor Angela Merkel, European Commission President Ursula von der Leyen, Italy′s Prime Minister Giuseppe Conte, European Council President Charles Michel and French President Emmanuel Macron in discussion. India and the EU are building relationships and Italy is a major player in these plans.
At the same time, India also needs better ties with Italy just like with other European nations. Both countries do not wish to choose sides and get directly drawn into the US-China bipolarity which makes it imperative for them to look at stronger relationships elsewhere. While India's big and growing domestic market attracts Italy, the latter's technical know-how in manufacturing is exactly what is required by India.
There is also potential for increased investments from both sides. Due to its colonial past, bulk of India's investments in the EU--half of it infact, is in the UK. post-Brexit, that would need to be reallocated and Italy alongwith Germany, France and Netherlands could be one of the primary beneficiaries. In much the same way, Italian companies are looking to reduce their dependence on China in the post-pandemic era and India is one of the most obvious destinations for such a rebound.
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The need for Italy and the options for India maybe greater at this time, but there is little to argue that on their own, both countries offer compelling propositions to each other. Increased diplomatic overtures between the two governments only seeks to highlight that.