Indians talk a lot about China, whether because they hope to increase cooperation or because they feel threatened by China – and so do Europeans. “The rise of China plays on the mind of people”, a former Indian diplomat said to us on a recent study trip. This sometimes gives the impression that both India and Europeans seem to be obsessed with China. No wonder, one might say from a business point of view: China is among one of the largest trading partners of both India and Europe. Bilateral trade between India and China is now worth $70 billion annually, while Europe’s bilateral trade in goods with China reached €467 billion in 2013 (with a trade deficit of €137.8 billion). By comparison, EU-India trade was worth just €72.5 billion in 2014. China’s is as the EU’s second largest trading partner (India ranks ninth).
The EU and India have sought to deepen economic relations, and there are Europeans as well as Indians who hope for a breakthrough in the near future. Talks on an EU-India Free Trade Agreement (FTA) began in 2007, but after 15 rounds of negotiations, they stalled in 2013. Europeans complain about India’s insistence on high tariffs on EU products; Indians complain that the EU uses quality standards to exclude its products (for example, the EU banned Indian mangoes in May 2014).
Since Narendra Modi took over as Indian prime minister in May 2014, he has attempted to boost India’s economy and in particular launched a “Make in India” to boost manufacturing. As Modi is inviting the world to invest in and trade with India, there has also been renewed movement on the FTA topic. Alongside his visits to Germany and France, Modi had also planned to visit Brussels in April 2014, but because the EU didn’t respond to Modi’s plans, he cancelled the visit. Some speculate that the EU High Representative Federica Mogherini was reluctant to receive Modi while two Italian marines, who are accused of killing two Indian fishermen in 2012, remained under arrest in India. Others say that the Indian request was made at short notice. Either way, a chance has been missed to reinforce economic cooperation.
When Modi then visited Berlin in April 2014, Chancellor Angela Merkel spoke in favour of the FTA, calling on both the EU and India to compromise and emphasising that India's concerns would also need to be addressed. In June, Trade Commissioner Cecilia Malmström met Indian Commerce Minister Nirmala Sitharaman at an OECD meeting in Paris, and shortly afterwards, the EU and India announced that negotiations would resume on 28 August. But Modi has since called off the talks after the EU banned Indian generic drugs.
There is no doubt an ambivalent attitude in Europe towards India, which cannot be only traced back to the dissatisfaction with the FTA negotiations. The EU has expressed concerns about human rights in India, particularly about the rights of minorities and women as well as about torture. In addition, Modi appears to be establishing tight control over media and NGOs in India, including foreign NGOs, as illustrated when the government froze and suspended the bank accounts of Greenpeace India. India’s rape scandals have been widely covered in European media, and a professor in Germany even rejected an Indian student for an internship at his institute because “this attitude is something that I cannot support”.
Politically, there seems little interest in developing the strategic partnership that goes back to 2004. The last EU-India summit was held in 2012 (though there are signs a summit may be held later this year). In Indian foreign policy debates, the EU is hardly mentioned, but, according to an EU representative, “this is seen as a European problem, not an Indian problem”. Indeed, we very often heard, the EU is barely recognised as an entity and is seen as a full partner in India even less than in China. One Indian journalist explained to us: “There are limitations to an entity with 28 member states”, and another journalist noted “The EU is seen as an enterprise, not as currency”.
If India and the EU cannot agree on a FTA for a few more years, it would be a missed opportunity, but in purely economic terms, not a disaster. India maintains well-established relations with EU member states, in particular France, Germany and the UK. However, politically speaking, the EU risks fading into insignificance in India even more than it already has. The FTA would not only increase India-EU trade, but could also be the beginning of increased political exchange and dialogue. Ignoring India not only means ignoring the world’s second-most populous country, but also the most populous democracy, which is emerging as a major global economy.
And yet the lack of mutual interest between the EU and India is surprising, given the convergence of interests between them – one of them being China. As attractive China is as an economic partner, its rise has caused both the EU and India anxiety about future stability in Asia. Whether Xi Jinping’s “China dream” means the re-creation of a Sinocentric Asia, or whether China aims for a “new model of major power relations” with the US, which Xi has been promoting since 2013, it will affect India – and Europe.
Thus India and the EU need each other. An Indian security analyst told us that, despite increasing cooperation with China, India is “looking for visible strong partners other than China” and that “India needs China, but not as much as it needs Japan or the West.” The EU on the other hand needs to diversify its relations in Asia and gain a deeper understanding of the new changing dynamics in the region – of which India is a crucial part. Parts of these changing dynamics are the new China-led initiatives such as the Silk Road and the Asian Infrastructure Investment Bank (of which India is a founding member – along with 14 EU member states).
It is therefore in the European interest to develop a closer dialogue with India – both through individual member states and through the EU institutions. Europeans need to see India as a partner – and at the same time also make India see Europe as a partner. A precondition for this, in turn, is greater understanding in Europe of India. Europeans generally know much less about India than China. As an Indian analyst put it to us: “there are probably more Europeans who know Guangzhou than Gujarat”.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.