NEW DELHI -- India and the European Union on Monday formally relaunched negotiations toward a free trade agreement, ending a hiatus of nearly a decade and aiming to strike a deal by the end of 2023.
The decision to revive the talks was made about a year ago, but global pressures may be giving the two sides extra impetus to hammer out their differences. Both are seeking to reduce their economic dependence on China, while Russia's invasion of Ukraine has cast ties with Moscow in a harsher light as well.
European Commission President Ursula von der Leyen's visit to New Delhi in April and Indian Prime Minister Narendra Modi's tour of Europe in May appear to have accelerated the process and helped define a road map.
"It seems both the EU and India have found new reasons to [pursue this trade pact]," said Sanjay Kumar Pandey, a professor of Russian, Central Asian and East European studies at the New Delhi-based Jawaharlal Nehru University. He pointed out that India and the bloc both want to diversify trade and economic partnerships with countries other than China, which is among their top trade partners.
At the same time, he said, as Europe strives to cut its energy ties with Moscow, it "would also like to wean away India from Russia [and may offer] some favorable terms" in the proposed FTA. Given its long-standing defense and strategic ties with the Kremlin, India has not condemned the invasion outright and has abstained from key United Nations votes on the war.
The EU is India's second largest trading partner after the U.S., with the merchandise trade between the two registering an all-time high value of $116.36 billion in the financial year that ended in March. The total was up 43.5% on the year, according to Indian government data.
From 2007 to 2013 -- before Modi came to power in 2014 -- India and the EU held 16 rounds of talks. But the negotiations were suspended over the EU's insistence on liberalizing Indian tariffs on goods such as automobiles, alcohol beverages and dairy products, along with India's demands for greater access to EU markets for its skilled professionals.
Now, however, they are aiming to firm up an ambitious, comprehensive arrangement.
India's Commerce and Industry Minister Piyush Goyal and European Commission Executive Vice President Valdis Dombrovskis held a meeting in Brussels earlier this month, during which the two sides announced they would also negotiate in parallel on two separate agreements related to investment protections and geographical indicators. GIs, as they are known, are tags that certify the geographic origin of goods -- say, Darjeeling tea or Basmati rice. As of March 17, India had 417 GI-tagged products. India says a GI pact would establish a "transparent and predictable" regulatory environment for trade in such products.
"These far-reaching negotiations... open a new and exciting chapter in the EU-India relations," Dombrovskis said after his meeting with Goyal.
For his part, the Indian minister said there is a "significant untapped potential which we hope to unleash" with the three agreements, adding that the strong bond between India and the EU would not only lead to greater engagement in trade but also in investment, technology, geopolitical dimensions and strategic ties.
"The fact that we are getting back to the negotiating table with an open mind... on all tracks is reflective of a new India which wishes to engage with the developed world," Goyal said. He stressed that the India-EU partnership is between two "complementary economies," meaning it is less about competition and more about collaboration.
India has a reputation for being wary of FTAs, as it seeks to protect its agricultural and other sectors. In 2019 it opted out of the Regional Comprehensive Economic Partnership, the world's largest free trade pact, encompassing the 10 members of the Association of Southeast Asian Nations as well as China, Japan and others.
But New Delhi is actively looking for alternatives. That is also "a major reason" for India to go for a trade alliance with the EU, Pandey said.
India signed major trade pacts with the United Arab Emirates and Australia earlier this year. It is negotiating a post-Brexit deal with the U.K., aiming to complete it by the year-end. And trade talks with Canada are also underway.
The benefits of an EU-India deal should be mutual. According to a June 2020 study by the European Parliamentary Research Service, exports from the EU to India would increase by about 52% to 56%, while imports from India would rise between 33% and 35% in most scenarios under a potential FTA that partly liberalizes trade in goods and services. "Gains from increased trade for both sides are between 8 billion and 8.5 billion [euros]," it said.
The first round of India-EU talks is scheduled to run until Friday. Back in Brussels, Goyal expressed optimism that this time would be different.
"India today is not the India of the 90s or what we were 10 or 20 years ago," he said. "India today wishes to engage with the world on modern products with high quality standards."