2019 – 2024: Why should India be top priority for EU Businesses?
The next 5 years will account for interesting times for the partnership between the European Union and India – paving the way for increased business cooperation. With India just having re-elected its Prime Minister, Narendra Modi for the second term, who upon winning the elections stated, “The next five years will be very important in the history of India, as was the period between 1942 to 1947. It is the time to regain the rightful position of India in the world order.”
According to World Bank estimates, India will continue to be the fastest growing major economy in the world, with 7.5% GDP growth predicted in the next two years. It is already one of the most sought-after foreign-investment destinations and is expected to become the third largest consumer economy by 2030. A young demographic base, growing income levels, expanding middle-class and stable democracy has propelled India into the league of major global economic powers. The recent budget under the Modi 2.0 government announced the government’s goal to make India a 5 trillion economy by 2024.
The ‘Strategy for India @ 75’ put together by the NITI Aayog is an attempt to bring innovation, technology, enterprise and efficient management together, at the core of policy formation and implementation. India will turn 75 years in 2022, and the government has put together a roadmap to ensure that it meets the milestones it has set out from a policy perspective.
Ease of Doing Business
India is now placed at 77th rank among 190 countries assessed by the World Bank in the Doing Business Report, 2019. India’s leap of 23 ranks is significant considering its improved performance by 30 places in 2018, a rare feat for any large and diverse country that is of the size of India. As a result of continued efforts by the regulators, India has improved its rank 53 positions in the last two years and 65 positions in the last four years.
The Doing Business in India report, states that during the last decade, the Indian economy has undergone a rapid change. The government has introduced a number of significant economic reforms measures and political parties across the spectrum have virtually been unanimous to maintain the momentum of reforms and to continue strengthening the same further.
The new EU strategy on India:
In November 2018, the EU adopted a new strategy on India which aims to strengthen the EU-India strategic partnership by focusing on sustainable modernisation and on common responses to global and regional issues. It is meant to serve for the next decade as a coherent platform to advance key EU interests, improving the way the EU approaches India.
The EU is already India’s first partner in terms of trade and investments. Bilateral trade in goods and services total € 125 billion (US$ 140 billion), while cumulative FDI amounts to US$ 81.5 billion. It is also worth noting that the EU-India trade in goods is remarkably balanced with both exports and imports amounting to € 45.7 billion (US$ 51.2 billion). This proves the complementarity of the two economies. Around 6000 EU companies are present in India, providing direct and indirect employment to around 6.7 million people.
However, the potential of the EU-India trade and investment relationship is far from being reached. From this perspective, the EU aims to achieve comprehensive and balanced agreements on trade and investment with India, as well as to support trade liberalisation and to ensure fair market access and predictable investment conditions.
Why the next five years matter most and what are the opportunities?
The last EU-India Summit transformed EU-India ties into a veritable strategic partnership by securing it firmly onto two new forward-looking pillars – a platform for climate and energy cooperation and a partnership on sustainable urbanization. The establishment of these two platforms have helped transform EU-India relations given India stands on the cusp of major transformations in both the energy and urban fields driven by strong social and economic rationales.
With these two platforms, EU companies now have a level playing field against actors like China, Japan, Canada, Australia and the US which have aggressively competed for presence in India’s lucrative infrastructure and energy markets. Not only does tapping into these markets enhance economic growth and job creation back in the EU but also reaffirms the EU’s image as a credible partner in India. Today, the EU and India have a dialogue on Environment, Energy, Climate Change, ICT and Urbanisation spearheaded by the European Union Delegation to India.
Some key areas for business cooperation in the next five years:
EU-India Policy Dialogues and the support for EU Businesses
Even though there is a viable ecosystem in place for EU companies to transfer technology and solutions to India, there is a lack of understanding of and access to these Indian opportunities in the EU. The Business Support to the EU India Policy Dialogues, which is a direct outcome of the new EU strategy on India, strives to increase business involvement in strategic areas of bilateral cooperation in order to reinforce the already strong partnership between the EU and India. These key areas are derived from on-going policy dialogues between the EU and India, such as environment, energy, climate, ICT and urbanisation and hold relevant, real-time opportunities for EU businesses interested in entering the Indian market.
Given that there is tremendous opportunity in India, backed by support mechanisms for EU businesses by the European Union through its funded projects and policy dialogues, it is only imperative that EU businesses put India as one of their go to markets over the next five years. If they don’t choose now, it will be too late.