EU-India: Relations at the Crossroads | FTI Consulting

EU-India: Relations at the Crossroads

Strategic Communications

January 7, 2014

What set out to be ambitious negotiations for a “Broad-Based Trade and Investment Agreement (BTIA)” between the EU and India has dragged on for over 6 years. While hopes of an EU-India Free Trade Agreement (FTA) by the end of 2013 have faded, there are signs that the first half of 2015 will provide some development once the new governments are sworn in after elections in India and the EU.

At present, the Indian government is ill-equipped to sign an FTA that has been so publicly criticised as anti-poor by the opposition. The criticism is harsh and at times misplaced, but effective for the UPA ruling coalition in Delhi, who cannot afford a bold economic step that could alienate vote-banks. EU leaders are getting understandably impatient but must see the 6 years in context.

This snapshot will shed light on the current negotiating positions of both India and the EU as well provide perspective on the timeframe by which an EU-India FTA could become a reality.

High potential

Today the EU and India are important trading partners. In 2011, trade between the two blocks had a value of €79.9 billion and in 2012 EU exports in goods amounted to €38.5 billion and in services to €11.5 billion.1 EU investment to India reached €3 billion in 2010. Considering India is the second largest emerging economy with more than 1 billion inhabitants and the EU one of the largest markets globally, it is clear that the potential benefits for both partners are much larger. Therefore the EU and India began negotiations with the ambition that this agreement would be the first of its kind. For the EU this is the first with a large emerging economy and for India with a developed country.

Regardless of the potential opportunities in specific sectors, an FTA between the EU and India would demonstrate that trade agreements between two large economies with different levels of development are feasible. This would be an encouraging signal for the multilateral trading system, which currently undergoes a two-speed liberalisation with a multitude of FTAs between developed countries that leave out developing or emerging economies. A successful FTA with India could pave the way and be a model of a future multilateral trading round.


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