Context- The recently concluded 15th Summit of India and EU, the broad consensus that emerged is to strengthen the EU-India Strategic Partnership.
India-EU areas of convergence-
- India’s largest trading partner, while India is the EU’s ninth biggest trading partner.
- India is among the few nations that run a surplus in services trade with the EU.
- Both share similar ‘universal values’ of democracy, pluralism, respect for international institutions and multilateralism.
- Share common interest in tackling climate change, and building trade.
However, India’s exports in the competitive EU market are not doing well such as-
- Agriculture Commodities– Apart from processed rice, the share of India’s agriculture commodities in EU’s import is invariably less than 3 per cent.
- Marine products – EU imports more from ASEAN than India despite its longer coastline.
- Labour intensive products– Bangladesh exports more such products like apparels and leather products than India.
- pharmaceutical sector- EU imports more by-products of same (chemicals, rubber plastic products) from China and ASEAN than India
What are the reasons for lower share of Indian export in the EU market?
- High production cost in India leading to higher import cost in EU market compared to other countries;
- High logistics costs and poor connectivity that make Indian exports uncompetitive in EU market.
- Inefficiency in trade facilitation measures leading to high cost of export or consignments being rejected, which has spill-over effects.
- India’s exports being subjected to higher para-tariff in comparison to other countries.
- India’s exports not meeting the European standard. Indian products have been rejected/ banned due to failure to comply with EU standards and this legacy is affecting India’s exports.
How India can boost EU trade?
- Reduction on production cost– Advance logistics/trade facilitation measures can keep the production cost low which increases the competitiveness.
- Better infrastructure– This leads to lower logistic cost and faster and direct connectivity of consignment to Europe.
- Enhancing connectivity– Facilitating people’s mobility and connectivity to improve mutual understanding and create opportunities for innovation and growth.
- Following Chinese strategy– Indian products have been rejected/banned due to failure to comply with EU standard. On the flip side, China produces goods complying with European standards at higher price than what they produce for African/Indian market. This way, China protects their brand value and manages cost.
- Indian producer needs to pay much more attention to complying with specific EU market standards.