Brain Booster for UPSC & State PCS Examination (Topic: India and European Union)

Brain Booster for UPSC & State PCS Examination


Current Affairs Brain Booster for UPSC & State PCS Examination


Topic: India and European Union

India and European Union

Why in News?

  • India and the European Union have agreed to strengthen the multilateral system together. Both sides have recognized that multilateralism is more needed in international relations today. Building strong ties with the European Union can help India in manufacturing as well as exports.
  • India and the European Union (EU) have held talks on re-opening dialogue on a trade and investment pact that has been in discussion for many years.

Need for Better India-EU Trade Relations

  • The negotiations between India and the EU on a free trade agreement have been stalled since May 2013, when both sides failed to bridge substantial gaps on crucial issues, including data security status for the IT sector. The negotiations were launched in June 2007.
  • On 8th February 2021, EU’s office in India releases a statement expressing the likelihood of the conclusive FTA between India and EU this year.
  • The EU side provided an update on the ongoing review of the Generalised Scheme of Preferences, which expires end of 2023, and on the work towards EU Carbon Border Adjustment Mechanism under the European Green Deal, while the Indian side provided an updated on the 'Make in India' and 'Self-Reliant India' initiatives.
  • Atmanibhar Bharat Program and Budget 2021-22 have emphasized exports to strengthen supply chains and achieve self-sufficiency. To realize the vision of a self-reliant India, India will have to boost supply chains, with strategic partners such as the European Union (EU), through phase-wise reductions of investment tariffs and import duties.

Trade Relations: India and EU

  • The EU is India's largest trading partner, accounting for €80 billion worth of trade in goods in 2019 or 11.1% of total Indian trade, on par with the USA and ahead of China (10.7%).
  • The EU is the second-largest destination for Indian exports (over 14% of the total) after the USA.
  • India is the EU’s 10th largest trading partner, accounting for 1.9% of EU total trade in goods in 2019, well behind the USA (15.2%), China (13.8%) and the UK (12.6%).
  • Trade in goods between the EU and India increased by 72% in the last decade.
  • Trade in services between the EU and India increased rapidly from €22.3 billion in 2015 to €29.6 billion in 2018.
  • The EU's share in foreign investment inflows to India more than doubled from 8% to 18% in the last decade, making the EU the first foreign investor in India.
  • EU foreign direct investment stocks in India amounted to €68 billion in 2018, which is significant but way below EU foreign investment stocks in China (€175 billion) or Brazil (€312 billion).
  • Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors.

Export Potential

  • India has an untapped export potential of $39.9 billion in the EU and Western Europe. The top products with export potential include apparel, gems and jewellery, chemicals, machinery, automobile, pharmaceuticals and plastic.
  • India benefits from tariff preferences under the EU’s Generalized System of Preferences (GSP) for several of these products. In fact, India is among the major beneficiaries of the EU’s GSP, with exports under the GSP valued at nearly $19.4 billion in 2019, accounting for nearly 37% of India’s merchandise exports to the EU.

India and EU: Points of Concern

  • The Free Trade Agreement between India and the European Union hangs. In addition, the European Union and India are also embroiled in an extremely bitter trade dispute in the World Trade Organization.
  • India had increased the duty on imports on certain items of information and communication technology (ICT) from 7.5 percent to 20 percent. After which the European Union has challenged this step of India in the Dispute Settlement Organization of the World Trade Organization.
  • India is ready for a preferential trade agreement (PTA) with the European Union.