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India-EU Relations: Trade and Investment Trends

Trade between India and EU has been growing at a fast clip. EU exports to India grew by 17 per cent between 2003 and 2004 while Indian exports to the EU registered a 16 per cent growth. In 2004, export of Indian metals, stones and ganite, etc. recorded the highest growth of 55.6 per cent over 2003, while export of engineering goods grew by 22.1 per cent over 2003. Chemicals and minerals, with a 22.1 per cent growth rate, was also a major performer for Indian exports. Total FDI inflows in India was to the tune of $4 billion between 1991 and 2002, accounting for 13.55 per cent of total FDI inflows into India which stood at $30 billion during the same period.

Trade between India and EU has been on the rise since 1991, but 2004 witnessed the fastest growth, recording a growth rate of nearly 17 per cent. Total trade between EU and India increased from € 28.4 billion in 2003 to € 33.2 billion in 2004. EU exports to India increased to €17 billion in 2004 from €14.5 billion in 2003, recording an impressive growth of 17.2 per cent in 2004 against a growth rate of 1.7 per cent in 2003. EU imports on the other hand increased from €13.9 billion in 2003 to €16.2 billion in 2004, registering a growth of 16.1 per cent.

During the January to October 2004 period, EU's major items of import from India consisted of textiles and clothing (28.18 per cent), engineering goods (12.09 per cent), gems and jewellery (11.07 per cent), leather and leather goods (9.38 per cent), chemical and allied products (8.87 per cent), metal and metal products (7.61 per cent), agriculture and allied products (6.58 per cent) and transport equipment (4.35 per cent). Similarly EU exported to India engineering goods (35.56 per cent), gems and jewellery (33.3 per cent), chemicals and allied products (8.31 per cent), metal and metal products (7.61 per cent) and transport equipment (4.29 per cent). In terms of growth, export of Indian metals, stones and ganite, etc. recorded the highest growth of 55.6 per cent over 2003, while export of engineering goods grew by  22.1 per cent over 2003. Chemicals and minerals, with a 22.1 per cent growth rate, was also a major performer for Indian exports.

Despite the positive growth trends in India-EU trade, India continues to be a minuscule trading partner for the EU. While the US is the largest trading partner for EU, with nearly 24.3 per cent of all EU's exports going to the US, China's share is 8.56 per cent compared to a mere 1.24 per cent for India. Similarly China accounts for 7.38 per cent of the share of EU's imports, only second to the US' share of 19.02 per cent. India again lags behind with just 1.24 per cent share.


EU Investments in India

EU's share in India's foreign direct investment (FDI) approvals during January 1991 to May 2002 was around 25.27 per cent. Actual FDI inflows from EU was to the tune of $4.09 billion during this period which accounts for nearly 13.55 per cent of total FDI inflow into India ($30.17 billion). In contrast, the US share in total inflows are just 10.37 per cent. The realisation rate, that is the actual FDI against the approved FDI, is also significantly higher for EU than the US but considerably lower than Japan, though volumes in case of both EU and USA are much higher than for Japan.

Top Five Sectors for EU Investment in India

Sector	Number of FDI Approvals	Amount in US $ Million	% of total approved for FDI
Fuel (power and oil refinery)	183	4310.19	22.83
Telecommunications	156	2765.49	15.94
Transportation industries	304	1512.53	8.13
Chemicals (other than fertilisers)	393	1129.87	5.69
Electrical equipment (including computer software)	774	953.46	5.03
Total	1810	10671.54	57.62

Source: SIA, GOI

Nearly 3349 technical collaborations have been approved for EU accounting for over 40.63 per cent of the total collaborations approved during August 1991 to May 2002. The highest technical collaborations have been in the electrical equipment (including computer software) - 496 - followed by industrial machinery and chemicals (471 and 409 respectively). Transportation industry has seen 259 collaborations and 195 of these have been in the mechanical and engineering industry.

Among the EU-member countries, the UK is the largest FDI investor in India accounting for $957 million in actual FDI inflows, followed by Germany ($910 million), Netherlands ($790 million), France ($481 million), Italy ($405 million) and Sweden ($265 million). Six member states - UK, Germany, France, Italy, Netherlands and Belgium - account for 92.28 per cent of total FDI approvals from EU, while they accounted for 89.3 per cent of the total inflows during the 1991-2002 period. Interestingly, smaller FDI investors like Sweden,  Denmark and Luxembourg have a better realisation rate in terms of the actual FDI investment inflows. Germany and Netherlands too have a good realisation rate.

EU Member States' FDI Profile in India (Cumulative 1991-2002 May)

EU Member States	FDI Approvals ($ Million)	FDI Inflows ($ Million)	Realisation Rate (Approvals/Inflows) x 100
Belgium	1076	116	10.78
Germany	2498	910	36.42
Spain	95	9	9.47
France	1661	481	28.95
Ireland	83	8	9.63
Italy	1289	405	31.41
Luxembourg	72	28	38.88
Netherlands	2267	790	34.84
Austria	83	25	30.12
Portugal	63	1	1.58
Finland	79	23	29.11
UK	5821	957	16.44
Sweden	569	265	46.57
Denmark	177	72	40.67
Greece	1	3	-
Total	15834	4093	25.84

Source: SIA, GOI

Some of the major EU companies that have invested in India during this period include General Electric Co., UK, Telia AB, Sweden, Cabitel SA, Spain, Companhia Portugues Telephone Services, Portugal, Telesystem International Wireless Corporation, Netherlands, Arabella Societe Amonyne, Luxembourg, Fiat, Italy, Deltic Management Ltd, Ireland, Ferro Stal Aktlend Esellschart, Germany, Air Liquide International, France, Warsila Diesel OY, Finland, Telecom Denmark Ltd, Denmark, Tractbel SA, Belgium, Mayr Melnhof Asia Holding GmbH, Austria, among others.


[icfdc.com , 26 November 2005]