🇮🇳 Growing economic relations between the EU and India
India is among the fastest-growing major economies in the world and is a major player in global economic affairs. India is an important trade and investment partner for the EU. It is a large and dynamic market with an annual GDP growth rate of around 6% (pre-Covid-19).
In 2020, India was the sixth-largest economy in the world with a gross domestic product (GDP) of over USD 2.6 trillion.
India’s growing economy
Using the alternative measure of purchasing power parity, India is projected to replace the United States as the world’s second-largest economy by 2050.
Indian household incomes are steadily rising, creating a growing number of middle-class consumers that will reach 580 million by 2025.
By 2030, India will add approximately 140 million middle-income households and nearly 30 million high-income households, creating a huge demand for high-quality, high-protein foods, as well as numerous opportunities in various sectors of the economy, including healthcare, infrastructure, education and financial services.
Doing business in India is not without challenges, some of which may seem insurmountable at first. Cultural barriers, bureaucratic hurdles, and India’s numerous distinct and diverse markets across the country may seem like obstacles to success. Add to that a complex regulatory framework that can vary from state to state.
The future of EU and India’s economic relations
An important objective of the EU in its trade relations with India is to work towards a sound, transparent, open, non-discriminatory and predictable regulatory and business environment for European companies trading or investing with India, including the protection of their investments and intellectual property. The goal is to help unlock the untapped potential of two-way trade between the EU and India.
Initiatives and Strategic Partnerships – A Roadmap to 2025 to strengthen ties between India and EU
In 2020, India and the EU signed a Strategic Partnership: A Roadmap to 2025. Under the Trade and Investment, Business and Economy section of the Strategic Partnership, the two entities agreed to the following strengthen mutual engagement through existing institutional mechanisms, notably the India-EU Trade Sub-Commission and its specialised working groups and dialogues, with a view to enhancing market access, particularly for Small and medium-sized enterprises(SMEs), addressing existing trade barriers and preventing the emergence of new ones, seeking alignment to international standards and best practices, easing up the assessment of conformity and improving investment conditions.
As India-EU relations deepen, there are many new initiatives aimed at leveraging the ever-growing trade between the two countries and addressing the issues that hinder even deeper and closer India-EU cooperation.
1) Lack of clarity on procedures and policies for foreign nationals starting a business in India and higher documentation burden compared to Indian startups hinder a level playing field for EU startups looking to grow in India.
2) Cultural differences and language barriers can be as much of a deterrent for Indian startups in the EU as processes and procedures for international expansion and therefore need to be addressed.
3) Restrictive regulatory requirements and policies such as on-site employment of professionals, physical offices, and turnover caps hinder the mobility of startups across EU countries. Different regulations and varying processing times within EU member states hinder cross-border mobility.
4) Future joint efforts by India and the EU must improve the ratio of applications to approvals for Indian startups in the EU.
5) The introduction of a startup visa by the Indian government can help overcome challenges faced by foreign entrepreneurs, such as visa application, documentation burden, limited startup growth, and high capital investment.
6) Key opportunities to improve the mobility of Indian EU startups include: Access to professionals, business experts, real-time users in the foreign market, and the ability to matchmake and find co-founders.
Statistics:
- The EU is India’s third-largest trading partner, with goods worth €62.8 billion in 2020, or 11.1% of India’s total trade, after China (12%) and the U.S. (11.7%).
- The EU is the second-largest destination for Indian exports after the US (14% of the total).
- With a 1.8% share of the EU’s total merchandise trade in 2020, India is the EU’s 10th largest trading partner, far behind China (16.1%), the US (15.2%), and the UK (12.2%).
- Trade in goods between the EU and India has grown by 12.5% over the past decade.
- Trade in services between the EU and India reached €32.7 billion in 2020.
- The EU’s share of foreign investment inflows to India has more than doubled from 8% to 18% over the past decade, making the EU the first foreign investor in India.
- EU foreign direct investment stocks in India amounted to 75.8 billion euros in 2019, which is significant but far below EU foreign investment stocks in China (198.7 billion euros) or Brazil (318.9 billion euros).
- Some 6,000 European companies are present in India, providing 1.7 million jobs directly and 5 million jobs indirectly across a wide range of sectors.
