India-EU ties can attain great heights but Brussels needs to be a little more sensitive towards New Delhi's needs Even as Britain's “leave” vote in the Brexit referendum continues to grab a disproportionate amount of media attention, the Narendra Modi government and bureaucrats in Brussels are working quietly to realise the full potential of India's relationship with the European Union (EU), which, many analysts believe, is as, if not more important, than New Delhi's ties with London. Largest trading partner This single minded attention to a possible upsurge in trade and other ties with Britain has diverted the focus away from the fact that the EU remains India's largest trading partner, accounting for more than 13 per cent of its total external trade. India, on the other hand, is the EU's 10th largest trade partner. Bilateral trade between the EU and India stands at $126 billion and foreign investments from the bloc add up to a massive $69 billion. The Narendra Modi government, which has made economic relationships the centerpiece of its foreign policy thrust, is keenly aware of this. Indian officials speak gushingly of how the EU is, despite its recent troubles, the world's single largest economy with the GDP in excess of $18 trillion. Technology provider Apart from the US and Japan, the EU is the world's top source of innovations and new technological innovations. India is keen on tapping into this advanced knowledge base to help take its economy and its people to the next level of development. The EU is a top source for advanced machinery, nuclear reactors and associated technology, military and civil aircraft, optic fibre, optical and other high tech equipment for India, while exports from this country include textiles, organic chemicals, minerals and fuels, tea and other commodities. In recent times, there has also been a dramatic rise in trade in services, which include computer and IT services, air and sea transport and financial and banking services. Roadblocks to further cooperation
Many Indian companies have invested heavily in setting up operations in the UK. These were to serve as beach heads for accessing the massive EU market. But Brexit has put those plans in jeopardy, thus, giving a push to the much delayed and much debated India-EU Bilateral Trade and Investment Agreement (BTIA). Proponents of the treaty say it will help India's exports of pharmaceutical products, industrial goods and agricultural commodities to the EU, which are currently hampered by technical, commercial barriers and sanitary and phytosanitary measures imposed by importing countries. Indian exports have been on a downtrend over the last year and a half and some experts say the BTIA could help reverse this trend and mitigate to some extent the shock that multilateral trade pacts such as the Trans Pacific Agreement is expected to deal to India's exports, Hard negotiations India has been negotiating the BTIA with Brussels since 2007. This agreement, which covers trade and investments in merchandise and services, has remained stuck because of EU's insistent demand that Indian tariff rates, which are at 13.3 per cent on average, be reduced to the EU level of 4.3 per cent. This will definitely lead to an increase in trade but could wipe out several industries in India such as automobiles, alcohol, FMCG and others and increase India's trade deficit. Many of these industries employ millions of people and a flood of cheap imports from Europe would threaten their livelihoods and lead to political unrest. No movement on liberalizing trade in services The BTIA, as it stands today, offers India little incentive in terms of trade in services, where it has a relative advantage. The EU has been reluctant to make strong and binding commitments for the supply of services in Mode 1 and Mode 4.
India is a large market. We have a large middle class with substantial purchasing power. This makes India a very attractive market for anyone negotiating with us.-Nirmala Sitharaman, Indian commerce minister