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Charting a New Course in India-EU Relations
More than 200 people, including EU and Indian officials, industrialists, professionals, decision-makers, political leaders and media persons, congregated in Brussels on 8 and 9 November 2005 for a conference hosted jointly by the Europe India Chamber of Commerce, Commonwealth Business Council and the Global Organisation of People of Indian Origin to discuss and debate the future of India-EU relations. The focus was on harnessing mutual potential to enhance trade and investment between the two entities. ICFDC.com's Adite Chatterjee files this exclusive report on the event's proceedings from Brussels.
Brussels: India's stature as a vibrant democracy has always been admired by the rest of the world. Its growing stature as an economic power to be reckoned with is just beginning to be recognised. Not so long ago, India inevitably was compared in not-so-favourable terms with China, the nation that has stunned everybody with its breathless pace of growth over the past decade. Today, India is not considered to be such a laggard after all. The positive aspects of India's economic growth in the context of its democratic set-up is seen to be a huge plus in its favour when compared to China. It is not surprising then that the European Union has begun to pay much more attention to India in the past couple of years. The signing of the Strategic Partnership between India and Europe is evidence of this growing engagement. And therein lies a huge opportunity for India: to engage with the European Union and enhance trade, investment and business partnership with a region that boasts of some of the most developed countries in the world, is home to 450 million people and witnessing astonishing growth rates among its new member states such as Lithuania and Estonia (where GDP growth is the fastest in the world at 10 per cent and 11 per cent respectively).
Clearly, the Strategic Partnership is one of the most crucial developments in India-EU relations. But while political leaders can only provide guidance, direction and a framework to boost business relations, it's for the business communities to grab the opportunity and give shape and substance to the opportunity. It was in this context that the Brussels-based Europe India Chamber of Commerce (EICC) hosted a conference on 8-9 November. The idea was to enable leading players in the economic arena in India and Europe to address issues that would help them to leverage the new opportunity, resulting from the new Strategic Partnership between the two entities. As Nirj Deva, Member of the European Parliament (MEP) and Chairman of EICC pointed out: 'There is a need to initiate dialogue between legislators and business in both entities to harness mutual potential.' Significantly, the venue of the conference - which was jointly hosted by EICC, the Commonwealth of Business Council (CBC) and the Global Organisation of People of Indian Origin (GOPIO) - was the European Parliament, where 732 members representing more than 450 million people conduct the legislative affairs that affect the 25 member states. Sunil Prasad, Secretary General of the EICC remarked: 'The rise of India is a phenomenon that has never been seen in the annals of the new global economic order. The economic reform is delivering prosperity to its people, creating an environment for greater interaction between economic and political forces. Big changes are on the horizon in the world of foreign direct investment as India is overwhelmingly considered to be the corporate investors' primary location for offshore activities.'
But even as there is recognition of the significant opportunity that exists, there is also a realisation that there are many challenges that have to be overcome. Let's look at what some of these challenges are. From the European point of view, as Erika Mann, MEP and Member, Committee on International Trade pointed out: 'The emergence of India, China and Brazil as global powers is viewed with trepidation in Europe. We were always convinced that India is a great power. And we have seen this in the software field. We are now seeing it as Indian companies turn international and are bringing into Europe their values and conducting themselves with great responsibility. Many member states are afraid of this challenge. Of course we are facing difficulties because of this and therefore there is need to make sure that there is real understanding between India and Europe.' Clearly, the reference was to the 'outsourcing backlash' which India has been experiencing in many Western countries, but as Ms. Mann further explained: 'Companies need to go to politicians and explain the facts to them. Explain what's behind outsourcing, how does it help us in the future...we should see the positive aspect of outsourcing.' Added Geoffrey Lipman, Special Trade Advisor, World Tourism Organisation: 'After preaching free trade, Europe shouldn't try to change the rules of the game just when someone else has a competitive advantage.'
A key challenge, from the Indian point of view, is the fact that the EU's relatively higher tariff regime and trade defence measures get extended to new member countries. Moreover, India continues to have a poor image as a FDI destination, thanks largely due to its slow speed of decision-making, high levels of corruption and red-tape, bad governance, rigid labour laws, inadequate protection of intellectual property rights, bureaucracy and judicial delays. While the EU is India's largest trading partner - EU's share comprises nearly a fourth of India's total exports (23.72 per cent in 2004-05) and accounts for 16.69 per cent of total Indian imports - India's share of total EU imports and exports is less than 2 per cent respectively. It would perhaps be relevant to point out in this context that China is the EU's second-largest trading partner against India's 14th. However, the positive aspect of EU-India trade is that India's share of total EU imports and exports is growing significantly. In 2004, according to Eurostat, EU imports from India grew by 16 per cent against 2.8 per cent the previous year. Similarly, EU exports to India grew by 17.2 per cent in 2004 compared to just 1.7 per cent the previous year.
 Analysing the situation, Haleh Bridi, Director, World Bank, Europe, said: 'India is almost there among the G-8 countries. A lot of growth has been because of the service sector. Export of services is a large component of the growth - while in the EU this growth in 4-5 per cent, in India's case it is 17 per cent. However, due to problems such as a large fiscal deficit, rigid labour laws, a complicated regulatory system, India is not benefiting to the fullest from trade and investment.' On the trade front, Ms. Bridi said that 'a more proactive effort was needed and a process of reciprocity would help in improved access to markets on both sides'. Perhaps the biggest challenge for India, as Ms. Bridi pointed out in her presentation at the conference, is the fact that India is a poor performer when it comes to 'doing business'. According to the World Bank's Doing Business survey of 155 countries, India ranks a low 116th. There is good news as well. Colette Mathur, Director, World Economic Forum, said: 'India's competitiveness is improving. It gained five ranks in 2005 vs 2004.'
The challenges, notwithstanding, most of the speakers at the conference were upbeat about India's ability to overcome the barriers and become a key player in the global economy. Dr. Charles Tannock, MEP and Chairman, Friends of India Group in the European Parliament predicted: 'Within 20 years, India will overtake China in the economic front.' What also gives India a definite edge over the competition - particularly China - as Ms. Mathur, pointed out, are the 'soft factors'. 'The modern societies of India and Europe are more alike in many ways. Both face the challenge of integrating states given their diversity.'
What also provides both India and EU an opportunity to leverage the Strategic Partnership in a meaningful manner is the recognition in Europe that in the light of 'the rapidly changing face of European society, there is a lot that Europe can learn on cultural diversity from India,' as Dr. Tannock remarked. Ms Mann was even more forthright in her remarks on the challenge that European society faces today: 'India's experience is being reflected in Europe. We have a bit of the Third World in our countries as well. We cannot phase out the Third World. We need to work on it, make sure that people have a vibrant education system which benefits all and not just the elite. This is the challenge for not just India but for Europe as well. It is a huge challenge for our societies.'
The Indian Diaspora which was represented by top business leaders, including Lord Dr. Diljit S. Rana, Dr. Mohan Kaul, Director General, Commonwealth Business Council (CBC), Dr. Prem Sharma, chairman, India Development Trust, UK, Dr. Ajit Shetty, CEO, Janssen Pharmaceutia, Belgium, Dr. Avtar Lit, Chairman, Sunrise Industries, UK, Ravi K. Mehrotra, Chairman and CEO, Foresight Group Ltd, and Dr. Thomas Abraham, Chairman, GOPIO International, among others also candidly discussed some of the strengths, weaknesses, threats and opportunities of India as a key FDI destination. Dr. Kaul commented that 'Indian companies need to move up the value chain and need to tie up with with marketing and distribution partners in the West.' He further pointed out that the areas where there is a lot of opportunity for Indian companies are in the areas of services, life sciences, genomics, biotechnology for health, material sciences including nano-technology, aeronautics and space. In a first of its kind initiative, a Global Economic Crime Programme has been launched in October this year with the CBC, Scotland Yard and NASSCOM as partners. Already, India and EU are collaborating to counter terrorism and the EU has allocated Euros 200 million to this effort.
Clearly, as Nirj Deva pointed out, societies that stop innovating, stop growing. 'Unless you are innovating, you have to run faster just to stand still. The lack of innovation and enterprise within Europe and US is the real threat to these societies.' Echoing Deva's thoughts, industrialist Sanjay Dalmia remarked: 'If India and China are rising today it's because of their entrepreneurial skills and their ability to innovate.' But despite the upbeat mood, Indian businessmen felt that Indian policy-makers needed to get their act together or India would lose the advantage and the 'India growth story' would remain just a lot of hype.
Can India live up to the hype? Can India-EU relations extend beyond government interactions and agreements and translate into enhanced trade and investment, increased FDI and a partnership that is as real as it is 'strategic'? The jury is still out on that, but as EICC's Prasad stressed: 'The strategic partnership will have no meaning unless the scope of the agreement and its mechanism are put to regular review, greater interaction. The civil society and business community of Europe and India can help generate a deeper understanding on complex issues and address the differences in perception.'
[icfdc.com,
10 November 2005]
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