India looks for more substance in relations with Union

Date: 08/05/1997

INDIA's political roller-coaster last month may have rocked the sub-continent, but improving relations with Europe remain on track.

Although the new Prime Minister Inder Gujral places Europe well down India's list of political priorities - below its close neighbours, Russia, and its allies from the non-aligned movement - he is well aware of the importance of European markets, and diplomats believe he will continue his predecessors' push for greater economic ties with the EU.

Next week, officials from both sides will discuss how to invigorate their relationship and update a 1993 cooperation accord already considered out of date.

On the table will be calls from the European Commission for an 'enhanced partnership', with more high-level dialogue, better trade conditions and European support for India's structural adjustment programmes.

India has welcomed the proposals and is likely to respond to next week's joint commission with new demands for access to European markets. “We are encouraged by what the Commission has done; it will help focus our relations,” said a New Delhi source. “Nevertheless, we would like to have seen a bit more substance, more tangible areas of improvement identified.”

While one-third of Indian imports come from the EU, only around 1.4&percent; of Union imports come from India. This 'imbalance', as New Delhi describes it, is not helped by tight EU quotas on Indian textiles - the country's main and most competitive product - and the constant threat of anti-dumping duties.

Commission officials reply that India is hardly leading the way in lowering textile barriers, but accept the country's greater need for development.

India also loses out from European preferential trade agreements with other developing countries, and regulatory barriers to its products.

India argues that without Union concessions to the sectors which make a financial difference today, the 'enhanced partnership' will amount to little more than words. It would be in Europe's long-term interest to listen. Although the Union has recently focused upon markets further east, European traders are waking up to the possibilities offered by the world's largest democracy.

“Even if India is still only a tiny part of world trade, a tremendous potential exists. Europe has the chance to capitalise on this in a way that did not happen with many Asian tigers,” External Relations Commissioner Manuel Marín told EU governments last year.

Indian growth may not have been as impressive as that of the Asian Pacific rim in the early 1990s, but while the far eastern tigers seem to be slowing down, their Indian cousins are - despite some faltering steps at present - only just getting into their stride.

The country's 150 million middle-class consumers are set to increase to 300 million (twice the population of Russia), and India is already the world's 11th biggest economy.

The Commission charts rising exports, foreign direct investment and industrial growth, pointing to “considerable high-technology capacity” and advanced sectors such as chemicals and electronics. It sees opportunities for Europe in insurance, transport services, cars and energy.

But Indian external and internal debt is huge, public sector reforms have been slow, the financial sector still needs overhaul and there is a big demand for infrastructural development.

Foreign companies are finding India's legacy of 'self-reliance' difficult to overcome, tariffs to the EU are high, intellectual property laws are weak and corruption is endemic.

In many ways, Europe has a golden opportunity to guide its development. As the EU's proposal for an enhanced partnership declares: “The world economy is not a zero sum game. It is in the EU's interest to see high rates of growth in India and vice versa.”

As long as the Union can live with India's fierce independence, New Delhi will go along with that.