Tomorrow's Europe: Increased Opportunities for India

On 1 May, 2004, 10 new member states joined the EU - the biggest enlargement ever and a historic occasion and opportunity. With the induction of the 10 countries - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia - the EU has emerged as the world's biggest eoncomic bloc with a population of over 450 million and a GDP of over EUR 9.25 trillion (Rs  460 trillion). Negotiations with Bulgaria and Romania will continue for their inclusion as member states. The EU has decided to begin negotiations with Turkey if sufficient progress is made towards meeting the criteria by December 2004.

EU Enlargement - A Cost-Benefit Analysis
The EU enlargement is the most ambitious project the EU has ever undertaken. It is without precedent in terms of scope and diversity: number of candidates, geographical area (increase of 21.6%), population (increase of 20%) and the differences in history and culture. Economically too, the EU's average GDP will fall significantly. The latest figures available suggest that the induction of the 10 new members will cost some EUR 70 billion (Rs 3,487 billion) by 2006 alone, of which EUR 40 billion (approximately Rs 1,993 billion has already been allocated from the EU's budget.

Nevertheless, the benefits and opportunities of enlargement far outweigh the obstacles, costs and risks. Expanding the EU internal market, economic growth in the new member states and other factors, will in due course, create greater prosperity across the board. However, the principal benefit of the enlargement is that it will bring the artificial post-second world war division of Europe to a peaceful conclusion and extend the zone of peace, stability and prosperity. The enlargement process will secure political stability, prosperity, democracy and respect of human rights on the European continent as a whole.

Enlargement benefits India
Enlargement also brings benefits to third countries. Third countries including India will benefit significantly from an enlarged EU. A single set of trade rules, a single tariff, and a single set of administrative procedures will apply throughout the single market of the enlarged Union of 25 countries. This will simplify dealings for third country operators within Europe and improve conditions for investment and trade. The anticipated eventual economic growth and development in the new member states - and across the enlarged EU as a whole - should also create fresh market opportunities for Indian commerce and investors.

A feature of the financial landscape since 1 January 1999, the Euro became a physical reality across Europe on 1 January 2002, when the new Euro banknotes and coins were introduced as legal tender in 12 member states (the exceptions being Denmark, Sweden and the UK). This was the largest monetary changeover the worlds has ever seen. Successful development of the Euro is central to the realisation of a Europe in which people, services, capital and goods can move freely - to the benefit of Europeans and those who travel in Europe or do business there. Over the past 12 months, it has strengthened in value and is firmly established as the second international reserve currency.

Schengen facilitates travel and trade across Europe
The Schengen system, which governs procedures at external borders, airports, short-stay visas and asylum seekers, facilitates travel and business in Europe because one visa allows access to all Schengen countries. This enables businessmen - and all travellers - to visit a number of countries with only minimal bureaucracy. A total of 13 of the 15 EU member states have signed up to the Schengen Agreement together with Norway, Iceland and Switzerland (the EU exceptions are the UK and Ireland). All new members have to incorporate Schengen rules before they join the EU. For information about the Schengen Agreement, the rules and how to get visas, visit www.eurovisa.info

Gearing up for the Future
Meanwhile, thinking and reflection continues regarding the future shape and structure of the EU and its place in the world. Internal organisation and restructuring is a top priority. On 18 July 2003, M. Valery Giscard d' Estaing, former President of France and Chairman of the Convention on the Future of Europe formally presented the new draft EU constitution in Rome.

A process is also underway to define the nature and scope of the enlarged EU's relations with others. In the first instance, this was launched in the shape of a European Commission communication 'Wider Europe - Neighbourhood: A New Framework for Relations with our Eastern and Southern Neighbours'. This was followed by the communication 'A secure Europe in a Better World' presented to the European Council at Thessaloniki on 20 June 2003

Opportunities for EU-India Business Partnerships
With more than a decade of focused structural reforms behind it, India's economy can today be counted a real success story. Transforming, by gradual trade liberalisation, from an import-substituting economy to greater export orientation, India has increased its share of world trade from 0.5% in 1992 to 0.8% a decade later. The Indian economy grew by an average 6% per annum throughout the 1990s. A notable socioeconomic factor reflecting this economic strength has been the substantial growth in India's middle income population.

The Indian government's medium-term export strategy for 2002-07, announced on 30 January 2002, observed that: "A compositional change has been witnessed in the export basket of India with the opening up of the economy. During the last 10 years there has been a significant shift in the composition of the export basket. The share of manufactured goods in total export of India has increased from 76% in 1991-92 to 83% in 2000-01." This process continues. The MTES puts strong emphasis on the need to have a comprehensive strategy towards trade expansion between India and its important trading partners.

Going into the third generation of reforms, India's future economic prospects appear increasingly bright, particularly given Indian industrial eminence in key sectors, many of them high-tech. India is a world leader in information and communications technology (ICT), in particular in the field of outsourcing. A competitive resource base, efficient market linkages, a well-timed development in respect of global market trends and a highly supportive regulatory/policy environment has contributed to India's impressive stride in ICT. Software is projected to become India's largest industrial sector, contributing 28% of GDP by 2020. By 2008, the sector is expected to grow to US $ 80 billion. This is one area that offers considerable opportunities for EU-India business partnerships.

There is enormous potential for growth in a number of fields such as:

Financial Services - especially banking and insurance

Power and Energy Supply - where economic and population growth creates growth in demand.

Telecommunications - both fixed and cellular lines and Internet usage.

Mechanical Engineering  - where there is important expansion and improvement of the infrastructure base and major projects in the pipeline

Biotechnology - India being the world's largest market for vaccines of all types

Textiles and Clothing - a traditional staple industry that, so long as certain conditions are met (such as modernisation, improved competencies and deregulation), could benefit significantly from the end of textile quotas in 2004.

Because the EU is India's main trading partner, Indian economic growth is inevitably reflected in growth in trade with the EU. This is particularly evident because the EU is the most open market in the world and so the most accessible to Indian products. A good example of this trend is trade in services between India and the EU, which has increased significantly in recent years - in both directions. In 2001, India exported EUR 2.5 billion (over Rs 124 billion) worth of services to the EU, whilst EU service exports to India amounted to EUR 2.4 billion (Rs 119 billion). This is an economic area with rich potential for growth and in particular for future EU-India bilateral business, which would create tremendous prospects in terms of trade, job creation and economic progress.

Similarly, whilst being the leading foreign investor in India, the EU is also a major destination for Indian investors. About 40% of Indian overseas investment flows into Europe, compared to 20% to the US. Indian firms now operating in the EU include India's IT giants - Infosys, Tata Consultancy Services, HCL Technologies, Wipro and Birla Soft - but also a range of firms from various sectors like Bharat Forge, Thermax, Tata Tetley, Compact Disk India Ltd, Mastek and Bank of India.

In 2001, the EU invested over EUR 1.25 billion (Rs 62 billion) in India, making it the top foreign investor. The EU is also India's biggest trading partner, sourcing 21.4% of India's imports and taking 23.2% of exports in 2002. As India's leading trade and investment partner in both directions, the EU therefore shares the view that India's reform process is working well and should continue - for instance, through a move to rebalance taxation away from import tariffs - and that, as a result India has great potential for economic growth in the years ahead.  The EU is committed to supporting this trend. This will require support for trade and economic development, partnership to supply the needs of India's growing market - on which further economic development will depend - and inward investment.

Initiatives for Enhancing Trade and Investment
EU and India are working together to enhance the trading environment in general, to improve trade in specific products and reduce the various market irritants that inhibit trade flows between the two regions - for instance, by improving industrial infrastructure and clarifying policy signals with regard to foreign investment in India. This is reflected both in the range of commercial initiatives between the two partners, such as the 2000 Joint Initiativ to Enhance Trade and Investment and the 1994 Memorandum of Understanding on trade in textiles and in economic cooperation ventures and other initiatives such as:

The EU-India Civil Aviation Project provides short and long term training and knowledge transfer, at the same time building awareness of European safety methods. This strengthens civil air safety and stimulates cooperation between EU and Indian civil aviation authorities and aerospace industries. With a total investment of EUR 32 million (approxmimately Rs 159 crore) contributed by the EU, the government of India and the European aerospace industry, this project - the largest EU-India joint economic cooperation project - was formally launched in February 2001 and runs until the end of 2004. On the Indian side, the project involves the Ministry of Civil Aviation, Hindustan Aeronautics Ltd (HAL) and the Society of Indian Aerospace Technologies and Industries (SIATI). The EU partners are the European Commission and the European Association of Aerospace Industries (AECMA, which manages the project).

The EU-India Maritime Transport Project is improving the efficiency of major Indian ports and helping the government of India to introduce electronic data interchange (EDI) in Indian ports, for the benefit of India and the EU alike. It provides a model and catalyst for increased efficiency and productivity in the Indian port sector. This will contribute towards improved trade and investment prospects for both Indian and EU interests. JNPT (Mumbai), Chennai and Tuticorin ports, in particular, are benefiting. The project includes supoort for the development of cohesive 'port communities' and provides for training of key personnel from ports and customs, both 'on the job' and through work/study tours in Europe. This involves a number of Indian authorities led by the Ministry of Shipping. EU and Indian shippers and ship owners are consulted for their recommendations on improving port services.

The EU-India Agreement on Science and Technological Cooperation was signed in November 2001 and allows Indian scientists to participate in EU research activities and gives European scientists access to similar programmes in India. India is a genuine world centre in a range of high-tech and scientific fields and there is enormous potential for EU-India collaboration in very high-tech areas such as information technology,  biotechnology, nanotechnology and new materials.

Most joint EU-India research to date has taken place under the EU's research cooperation framework programmes. the latest, the sixth offers particular opportunities to Indian scientists. The EU had supported 55 projects - worth EUR 23 million (Rs 114.5 crore) involving Indian scientists since 1997. Building on this success, the EU proposes to expand cooperation to other research fields at the cutting edge of high technology, as well as to global issues (poverty eradication, food security and safety, biodiversity, conservation, climate changes, security of human health, the role of science in society, knowledge and digital divides, etc.) reflecting the very nature of the strategic partnership between India and the EU.

The EU-India Trade and Investment Development Programme (TIDP), which got underway in early 2004 is a EUR 14 million technical assistance programme and is the outcome of close collaborative efforts involving both European and Indian business communities, the Indian Ministry of Commerce and Industry and the European Commission. The main objective of the programme is to make a real difference to the day to day working practice of those involved in commerce and investment through cooperation in such fields as sanitary and phytosanitary standards, intellectual property rights, investment facilitation and customs.

The ultra-dynamic Indian ICT industries have experienced phenomenal growth in recent years, attracting substantial EU investment in the process. There is still scope for further development and mutual gain. India and EU signed an IT vision statement at the Delhi summit in November 2001 and cooperation continues to grow.

The EU and Indian space industries already collaborate on a number of areas and maintain close contact. There is great potential for fruitful engagement for both sides in this sector, mainly through collaboration under the EU's Galileo programme. Galileo is Europe's initiative for a global navigation satellite system (GNSS) providing a highly accurate, guaranteed global positioning service under civilian control. In order to successfully complete the development phase (2002-05), a single management structure has been established: the Galileo joint undertaking (JU). It is charged to bring together public and private funding for the deployment and operational phases. The founding members of the JU are the European Community and the ESA (European Space Agency). The European Investment Bank and private companies can join. India and other third countries can participate. This area of activity will be the subject of bilateral discussions and a formal declaration is sought to launch the participation.

Besides the bilateral cooperation programmes betweent the EU and India, Indian interests have access to a wide range of regional and international EU programmes. Indian scientists have been involved in the EU's research cooperation framework programmes. Others make equally good use of the other initiatives to promote greater cooperation such as:

Asia-Invest II, which builds stronger economic links between Asia and the European Union in the interest of both European and Asian companies, and promotes Euro-Asian business cooperation, in particular among small and medium sized enterprises (SMEs) by sponsoring common projects. Grants are provided to non-profit business intermediaries such as chambers of commerce for match-making activities, Asian private sector development, institutional reinforcement and information and promotion activities.

Asia IT&C programme promotes IT&C cooperation between European and Asian non-profit organisations to the benefit in particular but not exclusively of small and medium sized enterprises, and aims to link Asia with Europe in the search for compatible IT&C solutions and standards. Projects are financed in eight areas: e-commerce, intelligent manufacturing, transport, society, education, health, agriculture and tourism.

Asia Link programme gives an impressive opportunity for higher education institutions in the EU and Asia to meet on a common platform. Asia-Link is an instrument for the support of organised, targeted and sustainable cooperative projects endorsed by the participating institutions. Grant support is offered for human resources development, curriculum development and systems development.

EU-Asia Pro Eco brings eligible countries in Asia (south and south-east Asia and China) and the EU together specifically to foster the adoption of policies, technologies and practices to promote a cleaner, more resource-efficient, sustainable economy in Asia. Support is given for conducting feasibility studies and implementing demonstration projects.

Asia-Urbs programme is a tool of city-to-city cooperation established in 1998 with the aim of promoting partnerships between local governments and communities in the EU and Asia, supporting the alleviation of poverty, and developing economic partnerships.

These issues are discussed at summit meetings, between Indian minister and their EU counterparts, in the regular meetings of the joint commission and by the round table. Crucially, it is discussed amongst business on both sides. The EU-India business summit was launched by the Confederation of Indian Industry (CII) to coincide with the first EU-India political summit in 2000.

Since then a business summit organised by UNICE, CII, FICCI (Federation of Indian Chambers of Commerce and Industry) and the business organisation of the country holding the EU presidency has preceded every political summit. It brings together business leaders, policy makers and political leaders. It is a powerful forum for tackling the barriers to greater trade and investment between the EU and India, and for networking.

Previous business summits have closely discussed within the framework of the joint initiative for enhancing trade and investment, industry recommendations in sectors such as manufacturing and engineering; information and communication technologies; textiles and clothing; power/energy; telecommunications; biotechnology; food processing; financial services and insurance. Individual businesses have met to discuss business opportunities, and there have been sessions on policy developments and investment opportunities.