Why in the News?

Recently, Commerce and Industry Minister Piyush Goyal highlighted six key principles to strengthen the partnership between India and the European Union during a meeting with Maros Sefcovic, the EU Commissioner for Trade and Economic Security.

What are the Six Broad Principles between the EU and India?

• Common Values: Establish a partnership based on shared values of democracy, rule of law, and an independent judiciary.
• Fair Trade Agenda: Develop a commercially meaningful trade agenda that addresses tariff and non-tariff barriers, ensuring benefits for small and medium enterprises, farmers, and fishermen.
• High-Quality Production: Engage in the exchange of best practices and harmonization of standards to achieve “zero defect” and “zero effect” production capabilities.
• Technological Collaboration: Work together to develop cutting-edge technologies and secure critical raw material supply chains, enhancing resilience against non-market economies.
• Sustainable Development: Cooperate on trade and sustainable development while respecting differing levels of development among nations, adhering to the principle of common but differentiated responsibility.
• Mutual Growth: Leverage India’s young talent pool to act as a bridge for mutual growth and development with the EU.

What is the Significance of the EU for India?

• Largest Trading Partner: The EU is India’s largest regional trading partner, accounting for approximately 12.2% of India’s total trade in goods as of 2023. This relationship facilitates substantial trade flows, with trade in goods reaching around €124 billion and trade in services amounting to €50.8 billion in 2023.
• Major Source of Investment: The EU is a leading source of foreign direct investment (FDI) in India, with an investment stock of approximately €108.3 billion in 2022. This investment supports job creation and economic development across various sectors in India.
• Technology Transfer and Innovation: The EU serves as a primary source of technology transfer to India, aiding in the development of critical sectors such as infrastructure, green technology, and digital solutions. This collaboration is vital for India’s aspirations to modernize its economy and enhance its global competitiveness.
• Strategic Partnership: The EU-India relationship is built on shared values such as democracy and human rights. It has evolved into a strategic partnership that addresses global challenges, including climate change, security threats, and sustainable development. This partnership is crucial for both entities to enhance their roles in global governance.
• Geopolitical Considerations: With the rise of assertive powers like China and shifting U.S. policies, the EU recognizes the importance of a robust partnership with India as a counterbalance in the region. Strengthening ties with India aligns with the EU’s goals of promoting multilateralism and addressing common security interests.

What are the challenges between India and the EU? 

• Trade Barriers and Market Access: Indian companies face increasing non-tariff barriers when trying to access EU markets, including stringent technical regulations, phytosanitary measures, and compliance standards. These barriers hinder the export of Indian goods and services, complicating efforts to establish a comprehensive Free Trade Agreement (FTA) between India and the EU.
  • Also, India is cautious about reducing high tariffs on sensitive sectors like automobiles and agricultural products, which the EU seeks to liberalize.
• Mobility of Professionals and Services Liberalization: The lack of a common working visa system in the EU restricts the free movement of Indian professionals across member states. India seeks greater access for its skilled workers in the EU, while the EU demands liberalization of India’s professional services sector, particularly in accountancy and legal services.

Way forward: 

• Balanced Trade Agreement: Prioritize resolving key differences in tariff reductions and non-tariff barriers, especially in sensitive sectors like automobiles, agriculture, and professional services, while ensuring fair market access for both sides to boost mutual economic growth.
• Enhanced Mobility and Collaboration: Establish frameworks for the free movement of professionals and expand cooperation in technology transfer, sustainable development, and resilient supply chains, leveraging India’s skilled workforce and the EU’s technological advancements.

Mains PYQ:

Q ‘Indian diaspora has a decisive role to play in the politics and economy of America and European Countries’. Comment with examples. (UPSC IAS/2020)

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