EU-Indian economic obstacles in wake of Ukraine crisisEconomy 8 May 2022
Estimated time of reading: ~ 3 minutes
Economic interactions are becoming an increasingly crucial link in the operation of the European Union with third parties in the context of global uncertainty surrounding the situation in Ukraine. This study will use the European Union’s relationship with India as an example. The EU-India High-Level Dialogue on Trade and Investment conducted its first meeting on February 5, 2021.
The High-Level Dialogue was co-chaired by Valdis Dombrovskis, Executive Vice-President and Commissioner for Trade, on the EU side, and Shri Piyush Goyal, Hon’ble Minister for Commerce and Industry, on the Indian side. Both Partners decided to create the High-Level Dialogue during the 15th EU-India Summit, which took place on July 15, 2020. The two sides had open and cordial discussions on a wide range of topics in order to improve bilateral trade and investment relations between the EU and India. Minister Goyal and Executive Vice-President Dombrovskis discussed trade and investment problems, focusing on the socio-economic impact of the COVID-19 pandemic as well as vaccine production and distribution systems, including value chain connections.
In the general sense, the EU and India economy relations are based on the special development cooperation programme. It includes the activities of the European Investment Bank, as well as achieving the sustainability. There are four more issues on which the EU supports India – water, clean energy, climate action, and urbanisation.
India is the EU’s tenth largest trading partner, accounting for 1.8 percent of total EU goods trade in 2020, trailing China (16.1 percent), the United States (15.2%), and the United Kingdom (15.2%). In the recent decade, goods trade between the EU and India increased by 12.5%. In 2020, service trade between the EU and India was worth €32.7 billion. In the recent decade, the EU’s share of foreign investment inflows to India has more than quadrupled, from 8% to 18%, making it India’s first foreign investor. In 2019, EU foreign direct investment stocks in India were €75.8 billion, a large amount but far less than EU foreign investment stocks in China (€198.7 billion) or Brazil (€318.9 billion). In India, there are approximately 6,000 European enterprises.
The EU and Indian leaders agreed to resume negotiations for a “balanced, ambitious, comprehensive, and mutually beneficial” trade agreement on May 8, 2021, according to the European Commission, and to launch separate negotiations on an investment protection agreement and another agreement on geographical indications. They agreed that trade talks should be linked to finding “solutions to long-standing market access challenges.” Leaders also agreed to establish a WTO discussion as well as collaborative working groups on regulatory cooperation and resilient supply chains. The execution of these measures will be overseen by the EU-India High-Level Dialogue on Trade and Investment.
Clean energy and climate action are at the forefront of the European Union’s domestic and international agendas, thanks to the European Green Deal. The EU and India share similar goals in these areas, with both wishing to reduce their reliance on fossil fuel imports, diversify their energy supply, and improve their energy efficiency and renewable energy share. Both are adamant about putting the Paris Agreement into effect. As a result, the EU and India are working together to ensure affordable, clean, and secure energy, as well as climate adaptation and mitigation. The India-EU Clean Energy and Climate Partnership (CECP), which was agreed upon during the EU-India Summit on March 30, 2016, and later confirmed in a joint declaration at the EU-India Summit, serves as the basis for this cooperation.
India has not yet distanced itself from Russia’s attack on Ukraine, thus it is unclear how relations between the EU and India will progress in the future. However, the EU must not lose sight of this crucial partner.
Written by: Nenad Stekić