The India –EU Free Trade Agreement is in incubation. Both parties are trying to sort out differences existing on many fronts. The FTA is important for Europe than for India because of the evolving global economic environment.

            Firstly, Europe is slowly dipping into recession amidst aging demography and shrinking GDP. Its exports are coming down due to strong competition from countries like China and South Korea. European firms are migrating and relocating production to new demand geographies in the emerging world. Many observers believe that the decline of Europe is not transient and hence is fundamental. How European economies should be renovated is the immediate question in front of the political leadership of the region.

            Secondly, for Europe, there remain only a few sizable demand surplus countries like India which can absorb European goods and services. Already, Indian market is showing the signs of East Asian domination, with Chinese and South Korean firms consolidating their position. Europe’s technology product exporter- Germany is keen to reach the Indian market on the plat form of an FTA, and is not ready to waste time. European firms have traditionally neglected the Indian and this has given opportunity to firms from Japan, South Korea, China etc.

            The India-ASEAN FTA on goods has expanded trade volume in two years. Besides, the just signed Indo-ASEAN Service FTA may strengthen Indian’s trade ties with East Asia. The service trade pact is slightly rewarding for India, compensating for its loss on the goods FTA front. In conclusion, Europe may not catch up with East Asian competitors if it is not bringing urgent momentum in India-EU free trade talks. It is now or never situation for Europe.

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