COMMUNICATION FROM THE COMMISSION - EU-India Enhanced Partnership
Date: 1996-06-26
Institutions: European Commission
Subjects: EU relations, India, cooperation agreement (EU), cooperation policy, development aid

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  26.06.1996 
COM(96) 275 final 

COiyDVlUNICATION FROM  THE  COMMISSION 

EU-India Enhanced Partnership 

Table ôf Contrats 

s 

" 

1.  The setting for current relations 

1.1  India: economy, society and domestic politics 

1.1.1  An overview of India 
1.1.2  Economic reforms and their impact 
1.1.3  Democracy in a multi-cultural society 

1.2  India in Asia and the world 

1.2.1  India's global position 
1.2.2  India, Asia and South Asia 

2.  EU-India mutual interests 

2.1  International political issues 
2.1.1  Global issues 
2.1.2  Regional stability and security 

2.2  Trade and economic issues 

2.2.1  Liberalisation for growth, trade and investment 
2.2.2  Removing additional barriers and improving the 

framework  for trade and investment 

2.2.3  Increasing awareness and information 
2.2.4  Sectors of specific interest 

2.3  Building a human dimension 

2.3.1  Supporting social development and basic services 
2.3.2  Opportunity creation 
2.3.3  Reinforcing democracy in diversity 
2.3.4  Encouraging sustainable development 

3.  Reinforcing partnership 

3.1  Points of focus 

3.1.1  Intensifying the political dialogue 
3.1.2  Trade and investment  facilitation 
3.1.3  Helping India face structural  adjustment 

3.2  Steps in the new partnership 

3.2.1  Laying the groundwork 
3.2.2  Working through the priorities 
3.2.3  Increasing cultural understanding 
3.2.4  Institutional  framework 

4.  Conclusions 

Annexes 

1.  Past EU-India relations 
2.  The Indian economy 
3.  Population 
4.  Evolution of Indian external trade 
5.  Evolution of foreign investment in India 
6.  Evolution of EU-India trade relations 
7.  India:  international development assistance for  1995-96 (indicative) 

2 

3 

3 

5 

6 

6 

7 

10 

12 

12 

13 

15 

16 
16 
20 
22 
23 
24 
25 
27 

I 
1.1  India: economy, society and domestic politics 

1.1.1  An overview of India 

India  catches  the  attention  with  its  cultural  diversity,  democratic  tradition,  and  recently 
renewed  economic  dynamism.  A  long-standing  partner1  of  the  European  Union  (EU)2, 
India is a rising force,  with the eleventh largest economy in the world3,  a Gross  Domestic 
Product  (GDP) of 212 billion ECU4 (1995) and the second largest  population  in the world 
with  at least  900 million inhabitants5 (the EU has 370 million) living on a land  area  of  3.3 
million km2 (the EU is 3.2 million km2). 

1.1.2  Economic reforms and their impact 

The  substantial  policy  changes  undertaken  since  1991,  have  promoted  an  expanding 
export-oriented  economy,  as well  as increased  private  sector  confidence.  From  1994  to 
1995  alone,  external  commerce  grew by 20%6, and  approved  foreign  investments  rose  to 
an annual figure of 3.5 billion ECU in 1994, compared to just  129 million ECU in  19917 

In  1994, Indian economic growth reached 5.5%8 and there is optimistic talk of forthcoming 
economic take-off.  Industrial  production  for  fiscal  year  1994-5  increased  faster  at  8.6%, 
and industry now represents some 30% of total GDP9.  Services account for  approximately 
42%  of  GDP,  with  the  fastest  growth  being  recorded  in  transport,  commerce  and  the 
financial  sectors.  India  already  has developed  a considerable  high-technology  capacity in 
certain  sectors  such  as  space  and  computer  software,  which  holds  out  the  prospect  of 
growth  in these high value-added  niches.  Indeed,  it is also increasing exports to  the EU10 
in a number of advanced  sectors eg chemicals, engineering and electronic  products as well 
as machinery and transport materials11. 

However,  the  economy  is  not  yet  reaching  the  growth  rates  of  nearly  10% recorded  in 
several parts of East and South-East Asia.  Also, trade and foreign investments are growing 
from  a  low  base  and  in  1994  exports  represented  just  9.5%  of  total  GDP,  and  India's 
foreign  direct  investments  were  only  slightly  higher  than  Malaysia's  (population:  19 
million).  The domestic  savings and investment  rates  (both  around  21%)  are  also  not  yet 
strong enough to  support  a major  boom, and public sector reforms  have been  slow with a 
public budget  deficit  equivalent to 6.7% of GDP in  1994.  This has also contributed  to the 
external debt of some 73 billion ECU12.  Hence a number of macroeconomic challenges are 
still on the agenda. 

1  See Annexe 1 
2  Please note that for the sake of transparency to the wider public, the term EU is systematically used.  In 
some cases the term "European Community" would be legally more exact. 
I  Sec Annexe 2, Table 1 
4  In all cases where the original statistics are in US dollars, the exchange rate used is  1  ECU= $  1.3.  Sec 
Annexe 2, Table 2 for past Indian GDP 
5  See Annexe 3, Table 1 
6  See Annexe 4, Table  1  for the overall trend 
7  See Annexe 5 
8  See Annexe 2, Table 3 
9  See Annexe 2 Table 4 
10  For trade balance, see Annexe 6 Table 1 
II  See Annexe 6 Table 2 
12  See Annexe 2 Table 5 

3 

1.1.3  Democracy in a multi-cultural society 

India  has earned  ils title  of the  world's  largest  democracy,  holding  regular  elections  since 
1947, having a free press, a firmly apolitical army and a well-established  rule of law, backed 
by an independent judiciary that  defends  the rights of citizens and business.  As a result it 
has enjoyed  considerable domestic political vitality for a country of its size and diversity, as 
was again proven with the general elections this year. 

This  is  no  mean  feat,  given  that  India,  a  secular  society,  is  a  cultural  cauldron  with 
considerable  regional  and  religious  variety.  Indeed,  India  is the  birth  place  of  numerous 
religions, notably  the Hindu  and  Sikh  faiths  as well  as Buddhism  and  Jainism,  and  is also 
home  to  an  estimated  130  million  Muslims  and  20  million  Christians.  However,  this 
diversity  produces  social  tensions  and  (ethnic,  caste  and  gender)  barriers,  which  the 
Government  of  India  (Gol)  has  tried  to  diffuse  by  a  long-standing  policy  of  positive 
discrimination measures, backed up in the constitution and a process of decentralisation. 

Economic  growth,  if widely  spread,  could  help to  reduce  such tension.  However,  India's 
2% annual demographic growth reduces the impact of economic growth and places a major 
strain  on  provision  of  many  basic  public  services.  This  challenge  is  being  met  in  some 
Indian  states,  where  female  education  is  higher  and  family  planning  has  effectively 
decreased  birth  rates.  Nevertheless,  the  challenge  remains  elsewhere,  as  even  if  India  is 
home to over  10 million university graduates - a tremendous achievement by any accounts -
average literacy is 64% for males and 39% for females, the latter being the priority targets 
in family planning. 

India  is thus  a  country  of  great  contrast.  The  reforms  have  bolstered  the  creation  of a 
'consumer  class'  (some  150  million13),  but  average  annual  per  capita  income  is just  235 
ECU, and poverty is still a problem (touching  some 210 million people14).  India  therefore 
faces a major development challenge, with malnutrition,  child labour (estimated as  affecting 
17 million children15), and relatively low life expectancy  (61 years16).  Indeed,  India's rural 
society (over 70% of its population) faces upheaval as population growth places a strain on 
the many monsoon-dependent  subsistence holdings (average land-holding is under  1  ha. per 
farm family). 

The renewed  Indian  dynamism therefore  still  has to  overcome  a number  of  challenges  to 
fulfil  its full potential. 

13  Not on a par with Europe's middle class, this group of people has nevertheless created a consumer goods 
market according to the National Council of Applied Economic Research, India 
14  Source: the National Council of Applied Economic Research, India 
15  Source: the International Labour Organisation (ILO) 
16  See Annexe 3 Table 2 for further  population-related data 

4 

1.2  India in Asia and the world 

1.2.1  India's global position 

India has long played  an important  international  role in the Non-Aligned Movement.  This 
stance  has  been  complemented  since  1991  India  by  a  multiplication  of  links  with  the 
developed world, including the EU.  Military co-operation with Russia continues, but trade 
has  decreased  substantially.  Political  relations  with  Washington  remain  subject  to 
American  concerns  over  the  possible  development  of nuclear  weapons  in the  South  Asia 
region.  This is fed  by  India's  explosion  of  a nuclear  device  in  1974,  its  development  of 
long-range  missiles  capable  of  carrying  nuclear  warheads,  and  non-signature  of the  Non-
Proliferation  Treaty  (NPT).  Japan  has  gained  in importance,  and  is  currently  the  largest 
foreign  aid  donor  to  India,  (20%  of total17),  although  almost  all  its  aid  is in the  form  of 
loans, mainly for infrastructure  projects. 

Its  regular  participation  in  United  Nations  (UN)  Peace-Keeping  Operations,  role  in 
establishing  the  World  Trade  Organisation  (WTO),  and  high-profile  positions  in  UN 
conferences  such  as  Beijing,  Cairo,  Copenhagen  and  Rio  have  been  further  signs  of 
reinforced  international commitment. 

1.2.2  India, Asia and South Asia 

India  has  been  keen  to  build  up  its  political  and  economic  links  with  the  rest  of  Asia, 
recognising  that  the  changing  economic  power  in  the  region  is  having  an  impact  on 
geopolitical  relations  and  that  its  own  economic  growth  depends  on  regional  political 
stability  as well as vice-versa.  The recent decision by the Association  of South-East  Asian 
Nations  (ASEAN)  to  make  India  a full  dialogue  partner  is therefore  an  important  step in 
India's  move  towards  Asia  allowing  it  to  participate  in  the  economic  and  political 
discussions of the ASEAN Post-Ministerial Conference,  and now also in the Asia Regional 
Forum. 

In South Asia, India's relations with neighbouring states have not always been easy, as seen 
by  its  three  wars  with  Pakistan  (1947-9,  1965,  1971).  Skirmishes  have  continued  with 
Pakistan,  even  recently  (February  1996).  On  the  other  hand,  the  border  conflicts  with 
China  have  calmed  following  the  Indo-Chinese  agreement  on  recognition  of  existing 
frontiers,  Indo-Nepalese  relations  have  taken  a  step  forward  with  agreement  on  water 
sharing,  and  India  enjoys  easier  relations  with  Sri  Lanka  following  increased  Indian 
surveillance  of the  Palk  Strait.  Relations  with  Bangladesh  have  also  improved,  although 
some problems, mainly linked to water and refugees,  still remain. 

In contrast to  many other  parts of the world,  there is a relatively  low degree  of economic 
and political co-operation in the South Asia region, which both explains and is explained by 
the tension.  Although  the South Asian Association for  Regional Co-operation  (SAARC) 
has  been  in  existence  for  10  years,  total  official  trade  among  SAARC  countries  is  only 
equivalent  to  3.4%  of  their  total  world  trade  compared  to  24%  for  intra-regional  trade 
among  ASEAN  countries.  However,  the  entry  into  force  of  the  SAARC Preferential 
Trading Arrangement (SAPTA) in December  1995 should help trade by reducing tariffs  on 
226 items including commodities.  If fully applied, this will constitute a considerable change 
in intra-regional trading practices. 

17  For aid breakdown, see Annexe 7. Tables  1, 2 and 3 

5 

2.  EIMndïfl mutml  interests 

Tiie ( 'o-operation Agreement between the European Community and the Republic of India 
on Partnership and Development as well  as the  accompanying EU-India Joint  Statement 
on Political Dialogue outline a number of areas where it is possible to act together.  Within 
this framework,  the following  areas  are  considered  particularly  important  in  economic  or 
political terms for both partners. 

2.1  International political issues 

2.1.1  Global issues 

Europe and India both face the challenge of maintaining a peaceful  and secure international 
environment.  Given the evolution towards greater inter-dependency any decision  taken by 
one party is likely to have a direct or indirect effect  on the other.  Furthermore, the number 
of local  or  regional  issues that  are recognised  as having  an international  impact  are much 
larger today than before.  A deeper EU-India  dialogue  as a part  of the global process can 
therefore help to establish the mechanisms needed to meet these challenges. 

Arms'  control  is  naturally  one  issue  of  interest.  Joint  examination  of  conventional  arms 
limitations, and control, non-proliferation  and disarmament of weapons of mass destruction 
(nuclear,  chemical, biological, ballistic missiles) would  be a first  step.  After  all, there  are 
plenty of old  and new items on the international  agenda with the Non-Proliferation  Treaty 
(NPT),  the  Comprehensive  Test-Ban  Treaty,  the  Cut-off  Treaty,  the  reinforcement  of 
international  nuclear  safeguards,  the  Chemical  Weapons  Convention,  the  Biological 
Weapons Convention,  ban on anti-personnel  mines, transparency  in armaments,  as well as 
the control  of sensitive dual-use goods and technologies.  In all these issues there is much 
to  be  gained  from  a  closer  EU-India  understanding,  with  the  aim  of  promoting  a  safer 
global security environment. 

There is also a need  for  co-operation  in meeting the environmental  challenges  outlined by 
the  1992  Rio  Earth  Summit.  A  strengthened  EU-India  partnership  stands  to  enhance 
mutual appreciation  of the manner in which issues such as climate change, conservation  of 
biodiversity,  pollution  prevention,  environmental  aspects  of  trade  and  other  important 
topics  are approached,  and  need to be included  in an enlarged  concept  of world  security. 
The  key  position  of  large  countries  like  India  in  helping  to  bring  about  a  substantial 
reduction on global C02 emissions in order to stabilise and subsequently reverse changes in 
climate will become more evident in the future. 

Intimately  linked  to  this  is the  wider  issue  of  energy  resources  and  security  of  supply in 
which  both  the  EU  and  India  have  a direct  interest.  If  India  follows  traditional  patterns, 
then  rapid  GDP  growth  will  result  in much  greater  total  energy  consumption  (eg  the EU 
consumes  14  times  more  energy  per  capita  than  India).  Simultaneously  with  other 
emerging  economies  and  many Western  countries,  India will face  a substantial  increase in 
demand  for  non-renewable  imported  energies,  and  risks  producing  ever  more  CO2 
emissions, raising geopolitical and global environmental issues, requiring a concerted  search 
for renewable alternatives. 

Both  the  EU  and  India  also  face  the threats  posed  by international  crime,  terrorism,  and 
drugs  trafficking.  Given  that  these  illicit  activities  benefit  from  their  ability  to  change 

countries  rapidly,  reinforced  co-operation  is  appropriate  here.  The  same  is  true  for  the 
control  of illegal immigration  flows. 

The  EU  is  thus  ready  to  be  a  partner  in  India's  integration  into  appropriate  international 
bodies,  so  long  as  India  accepts  the  international  responsibilities  and  Treaties  that  befit  a 
major  world  power. 

2.1.2  Regional  stability and  security 

In addition  to building  globally  reassuring  structures  to  promote  peace  and  security  there  is 
a  need  for  similar  action  on  the  regional  and  local  level.  Even  a  perceived  risk  can  for 
instance harm investment  by creating  an impression  of uncertainty  and  may divert  resources 
from  more productive uses.  Furthermore,  conflict  (especially when  combined  with  the  fear 
of escalation)  may have repercussions  on  the world  economy,  as witnessed  during  the  Gulf 
War.  Hence, the EU  has a very direct  interest  not  only in what  happens  on  its own  borders 
but  also in the situation in South Asia - and vice versa. 

Also,  although there  is no  desire for  European-style  regional  integration,  India  is  interested 
in  participating  in  the  wider  Asian  co-operation  process,  and  the  EU  can  support  this, 
drawing  on  its  own  experience  of  using  economic  integration  to  secure  political  stability. 
Furthermore,  both  Europe  and  India  need  to  explore  ways  of  reducing  tensions  with  their 
own  neighbours,  tensions  that  are  sometimes  fed  by  false  images  of  cultural  and  religious 
differences.  Each  therefore  can  learn  from  the  other,  and  help  to  defuse  issues  that  may 
otherwise disrupt good  relations and world  security. 

2.2  Trade and economic  issues 

2.2.1  Liberalisation for  growth, trade and  investment 

The  world  economy  is  not  a zero  sum  game.  Hence  it  is  in  the  EU's  interest  to  see  high 
rates of growth  in India and vice-versa.  For each to benefit  fully  from  the  other's growth,  it 
is  important  to  tackle  outstanding  barriers  to  trade  and  investment  within  the  WTO.  As 
India  presently  accounts  for  just  1.3%  of  EU  external  trade  -  much  of  this  in  low  added-
value products  - there is substantial  room for  expansion.  Following  dialogue with  the  Gol, 
the  Commission  has  thus  identified  issues  in  trade  and  investment,  where  action  could  be 
beneficial. 

Seen  from  Europe,  and  despite  recent  changes,  India's  tariffs  remain  high.  Furthermore, 
many  of  the  recent  reductions  have  not  been  bound  with  the  WTO.  India  has  also  been 
using  the  Balance  of  Payments  protection  clause  to  retain  extra  protection  for  certain 
sectors,  especially  consumer  goods,  where taxes  substantially  increase  import  prices.  Even 
major  export  sectors  like textiles and  clothing  are  still protected.  Naturally,  the EU  is keen 
for  these  barriers  to  be  tackled  in  a  multilateral  context.  India  itself  would  benefit  given 
that  increased  competition  would  force  domestic  producers  to  increase  productivity  and 
efficiency,  thus enabling greater  export  capacity. 

There  is also  a question  of direct  public  sector  intervention  in many  industries.  Where  this 
involves  public  subsidies to  companies,  the market  may be  distorted,  discouraging  efficient 
competition  (both  foreign  and  domestic).  This  is important,  as India  wishes  to  attract  and 
secure  long  term  investors,  especially  in  basic  infrastructure,  such  as  energy,  water, 
transport  and  communications.  Europe  has  undergone  a  process  of  liberalisation  in  many 
7 

of these  sectors  and  would  be willing to  exchange  its  experiences  with  India,  and  may  also 
be  able  to  give  practical  support  to  Indian  liberalisation  and  public  service  restructuring. 
Furthermore,  the  EU  can  provide  complementary  expertise,  eg  as  regards  renewable 
energies. 

Liberalisation  needs to touch  all industrial  sectors  and  even government  procurement  habits 
'Buy  national'  policies  are  costly  to  the  public 
if  India  is  to  reap  the  full  gains  of  growth. 
purse,  do  not  guarantee  the  best  possible  public  service,  and  limit  competition-induced 
productivity  gains  in  key  sectors.  On  this,  the  Commission  would  be  happy  to  discuss  a 
wide  reciprocal  opening  either  in  the  context  of  the  WTO  Agreement  on  Government 
Procurement,  or on a bilateral basis. 

As  efficient  financial,  telecommunications  and  transport  services  are  the  mainstay  of 
growing  economies,  liberalisation  of these  sectors  can  also  be  used  to  spur  rapid  growth. 
The  EU  is naturally  prepared  to  collaborate  in this process,  as well  changes  in  specific  sub-
sectors  such  as insurance  and  maritime transport.  Collaboration  on  these  issues  could  then 
stimulate new opportunities in, for  instance,  information  technology. 

In  a  similar  vein,  the  understandable  Indian  sensitivity  on  the  implications  for  internal 
stability  of  restructuring  agriculture,  although  justified,  must  not  prevent  a  progressive 
policy  change.  The  existing  agricultural  system,  even  with  technological  improvements, 
will  be  incapable  of  keeping  up  with  demographic  growth  and  rising  living  standards, 
especially  if some  Indian  farmers  are  to  take  advantage  of  export  opportunities.  Naturally 
the  EU  is  prepared  to  work  with  India  on  promoting  and  diversifying  commerce  in 
agriculture,  as well as on aligning  sanitary and phytosanitary  standards. 

2.2.2 Removing additional barriers and improving the framework  for trade and investment 

There  are  still a number  of horizontal  trade  impediments  raised  by both  sides  such  as  those 
arising  from  application  of  customs,  investment  and  consumer  protection  rules.  Many  of 
these issues can be handled by bilateral  co-operation,  for  example the  reduction  of technical 
barriers  or the  mutual  recognition  of conformity  assessment  and  of testing  and  certification 
procedures.  But  more  substantial  issues clearly need  to  be tackled  in the  framework  of  the 
WTO 

This being  so,  it is worth jointly  considering  common  interests  on  a large number  of  issues 
that  may at  some time figure  on the WTO's  agenda,  and  the Commission  considers  that  co 
operation  with  India  should  be  reinforced  on  WTO  objectives. 
Indeed,  building  on 
successful  past  experience  with  India,  there  is  clear  room  for  further  intensifying  this 
collaboration  by allowing ad hoc consultations when necessary  on  substantial  issues. 

As  regards  past  multilateral  commitments,  under  the  Uruguay  Round,  India  has  promised 
important  measures  in improving the  protection  of Intellectual  Property  Rights  (IPR).  The 
sooner  that  India  adopts  the  necessary  legislation  (not  just  the  establishment  of  a  'black 
box', but  full  application  to all sectors), the  sooner investors will feel  assured.  Indeed,  India 
should  also  consider  adhering  to  other,  stricter,  existing  international  IPR  codes  to  further 
reinforce  the  sense  of security.  Most  importantly,  when  legislation  does come  into  force,  it 
must  be  backed  up  by  effective  implementation  and  on  the  ground  control.  A joint  EU-
India  programme  is  already  envisaged  to  reinforce  the  intellectual  property  system  and  its 
alignment  with  international  standards.  Similar  work  has  already  started  in  institution 
building 
(eg  with 
standards  and  quality,  and  can  be 
awards/campaigns).  Help could  also be given in the regulation  of utilities. 

advanced 

further 

for 

2.2.3  Increasing awareness and information 

Barriers to trade and investment are not only the result of market structure.  There are also 
important  cultural  and information  barriers which need to be overcome for  partnerships to 
flourish  and business opportunities to multiply.  Hence the Commission will seek to use all 
the  necessary  means,  including  information  technologies,  to  improve  business  awareness 
and information  flows, also for small and medium sized enterprises. 

Indeed,  the  Commission  encourages  all  forms  of  links  between  civil  society,  educational 
establishments  and  the  media,  precisely  to  build  up  a  pool  of  mutual  understanding. 
Exchanges  of  experience  and  joint  activities  on  substantive  issues  such  as  vocational 
training are naturally part of this. 

To provide  a common  backdrop  for  these efforts,  it  would  be useful  to  hold  a regular  of 
exchange  views  on  economic  developments  in  the  EU  and  India.  This  could  include 
discussions on the regulatory framework,  investment promotion, and industrial policy. 

2.2.4  Sectors of specific interest 

Europe and India can work together to mutual benefit in a number of sectors. 

One clear  example is co-operation  on science, technology  and technology  transfer,  as co 
operation  here  promotes  an  enabling  environment  for  co-operation  in general,  as  well  as 
helping  the  search  for  scientific  solutions  to  global  problems.  Science  and  technology 
(S&T)  co-operation  will  therefore  be  actively  encouraged  under  the  Research  and 
Technological  Development  Framework  Programmes.  This co-operation  should  mobilise 
complementary  skills  from  across  Europe  and  India,  supporting  innovative  research  and 
promoting  the development  of human and  institutional  capital.  This reflects  the  way that 
the EU is taking a new look at means of enhancing  S&T co-operation  given  India's  status 
as an emerging economy. 

In  another  example,  both  Europe  and  India  have  an  active  interest  in  ensuring  that  all 
groups and countries have access to the 'Global  Information  Society'.  India and the EU are 
interested  in taking  advantage  of,  and  developing  these  advanced  technologies,  and  each 
can be a valuable  source and  partner  for  the other.  Bodies  such as the Software  Services 
Support and Education Centre (3 SE) can be used to  improve co-operation  in this market 
of the near future,  and help ensure full  participation  in the global efforts  to implement  the 
information  society. 

Similarly  existing  work  in  other  areas  can be built  upon  by establishing  a  closer  bilateral 
dialogue  to  overcome  problems  identified  by  the  business  community,  and  encourage 
industrial  co-operation,  trade  and  investment  facilitation.  The  list  of  sectors  should  be 
determined in function  of EU and Indian interest, and could include: 

financial  services (especially insurance); 
transport services and equipment; 
infrastructure,  energy (renewable, clean technologies and nuclear safety); 
capital goods and heavy machinery; 
the automotive sector (including parts and production); 

space technologies (including the Global Navigation Satellite System); 
agriculture; 
textiles. 

2.3  Building a human dimension 

2.3.1  Supporting social development and basic services 

The European  Union firmly believes that social development must be a parallel  objective to 
economic  development,  and that  it  is not  possible to  ensure  sustainable  economic  growth 
without taking into account the social dimension.  Furthermore, Europe has a  fundamental 
interest  in India making a success of its structural  adjustment  process.  Hence the need  to 
support the process by focusing resources on basic services where the Gol itself has already 
established a firm policy orientation. 

In terms of education, without widespread  basic literacy skills, the poor will have  difficulty 
in obtaining  better  paid  work,  and the country  as a whole will  have  struggle  to  meet  the 
demand  for  skilled  labour,  and  hence  higher  growth  rates.  Thus  the  recognised  need  to 
place great  emphasis  on education  and practical  skills, as well  as to focus  in particular on 
primary and female  education  and training. 
Indeed,  greater  female  education  will  release 
the potential  of 50% of India's population to  contribute  in all spheres of life.  Similarly, a 
healthy  work  force  contributes  to  an increase  in the  quality  and  motivation  of the  work 
force.  Hence  the  need  for  better  basic  health  services  as  well  as  health  education. 
Improved  education  and  health  will  then  contribute  to  cutting  the  continued  and 
unsustainably high birth rate. 

There  is  a  growing  understanding  of  a  socially-just  economy,  and  that  the  respect  of 
fundamental  social  rights  is a positive factor  for  economic  well-being.  India  and  Europe 
can work  together to  ensure the respect  of freedom  of association,  non-discrimination  and 
elimination  of forced  and  child  labour.  These issues, which  are closely linked  to  poverty, 
can only be progressively  tackled by a multifaceted  approach.  Both  sides have experience 
of these  problems  and  a dialogue  can  be  used  to  build  positive  programmes  of  action  to 
help tackle the problems at their root. 

In all these areas the EU and India can exchange experiences, and work together. 

2.3.2  Opportunity creation 

As a complement  so as to help meet the challenges posed by the modernisation  of industry 
and to  develop the  resource base  of the  country  in line with  Gol  policy,  another  area  for 
co-operation  could be employment  generation  activities  and  related  social  issues including 
the elaboration  of an appropriate  social  safety  net.  This may also link  in to  rural  poverty 
alleviation projects, and self-help projects generated by local groups. 

The  EU already has experience of the problems produced  by liberalisation,  and  recognises 
that  without  this  human  dimension  being  added,  India  will  have  difficulty  in  opening  its 
markets at fast enough pace to attract large-scale investment and rapid growth 

2JL2  Reinforcing democracy in diversity 

Given  the  extent  of  shared  European  and  Indian  values,  any  solid  relationship  cannot  be 
built without fully taking account of the human dimension. 

10 

One of the cornerstones of these shared values is a belief in democracy, where the EU and 
India face  similar issues such as building democracy in multi-lingual,  multi-religious, multi 
cultural  environments  and  have  been  examining  how  to  improve  co-operation  between 
different  levels of decision-making. 

Europe and India also have much to learn from  each other when it comes to  empowerment 
and  development  of  dynamic  local  democracy. 
Indeed  empowerment  is  also  important 
when  it  comes  to  developing  the  economy,  dispensing  basic  services  and  wisely  using 
international assistance  funding. 

2.3.4  Encouraging sustainable development 

Environment  and development  are closely linked.  However,  the domain  has broadened  in 
recent years as the need to link human and economic aspects has become more apparent  if 
sustainable  development  is  to  be  achieved.  Pursuit  of  an  equilibrium  between  economic 
growth,  social  stability  and  environmental  conservation  will  become  more  important  and 
discussion  on  the  path  to  follow  should  be  encouraged.  Sustainable  development  as  a 
concept  affects  not  only  natural  resources,  but  entails  a  continuing  reappraisal  of  the 
manner in which environmental criteria are taken into account  in all other areas relevant  to 
the EU-India partnership. 

An  enhanced  partnership  with  India  to  consider  loss  of  biological  diversity,  sustainable 
management  of natural resources, clean energy production,  pollution of air, water and soil, 
the  urban  environment,  waste  management,  clean  water  supply,  the  application  of  clean 
production technologies and various other issues of mutual interest  will be pursued.  For 
example,  in  the  WTO's  Committee  on  Trade  and  Environment  India  and  the  EU  could 
usefully  hold  a  constructive  dialogue.  On  the  bilateral  level  this  implies  a  continued 
exchange of information  on environmental policies, with particular regard to  environmental 
measures likely to have an impact on trade relations. 

11 

3.1  Points of focus 

3.1.1  Intensifying  the political dialogue 

Clearly  we  must  continue  the  dialogue  on  global  and  regional  issues  of  concern 
Nevertheless, there is a need to go beyond the formal exchange of speeches, and to create a 
series  of working  groups  in which  detailed  dialogue  can  be  held.  These  working  groups 
can then lead to some form of substantive action or decision, or agreement.  In this case the 
dialogue  will  not  be  on  purely  political  issues,  but  may  well  spill  over  into  technical 
assistance and trade. With this in mind, the Commission considers that sector  arrangements 
and agreements could usefully be explored on, for instance: 

dual-use products; 
drug precursors; 
money laundering. 

All are commercial issues, but which are closely linked to political questions. 
Furthermore, and given that some form of co-operation may be possible, it would be worth 
looking more closely at: 
climate change; 
the cultural dimension. 

3.1.2  Trade and investment  facilitation 

Our  aim  must  be  to  increase  two  way flows of trade  and  investment  substantially.  This 
implies considerable trade  and  investment  facilitation  work,  and  promotion  of business  to 
business  contacts,  which  again  implies  that  our  relations  need  to  go  beyond  the  formal 
periodic meetings. 

Indeed, there are many sectors which could benefit  from  an integrated  sector approach that 
set out to examine all the barriers that exist, negotiate their elimination on a Most Favoured 
Nation  basis,  perhaps  focus  technical  assistance,  and  maybe  conclude  some  sector 
agreements or  arrangements.  Trade and investment  promotion  could  be dealt  with  in one 
group, whilst  a number  of industry-focused  groups  could  be established  in function  of the 
interests expressed by the Member States, business and the Gol.  Such sectors may include: 

transport (especially maritime transport); 
telecommunications; 
energy; 
agriculture. 

3.1.3  Helping India face structural  adjustment 

As India has to  make considerable efforts  to meet structural  adjustment,  so it is only right 
to  help limit  the  impact  of this on the poorest  part  of the  Indian  population.  As such  the 
Commission  will  continue  to  support  health  and  education,  especially  for  women 
However,  European  development  co-operation  must  fit  into  an  overall  concerted  policy 
framework  if it is to be effective.  For this reason  a detailed  sector  dialogue  on the policy 
lines, linked to the co-operation, needs to be maintained. 

12 

3.2  Steps in the new partnership 

3.2.1  Laying the groundwork 

In  the  framework  of  the  co-operation  agreement  and 
Communication  seeks to build on this basis by stimulating a wide discussion, in order to: 

the  joint  statement, 

this 

take stock of current activities; 
establish priority areas for action. 

The Commission invites a wide participation in this discussion and the suggestions made by 
the  European  institutions  on  this  Communication  will  clearly  be  a  first  major  input. 
Furthermore, the Commission proposes the possibility of joint  reflections  with the Member 
States to  look  at  future  challenges in EU-India  relations  so as to  ensure that  the  EU  as a 
whole can draw a maximum synergy from current activities and future  developments. 

Business will have a number of chances to  make its views known,  not least  at the planned 
Forum on investment in trade and co-operation foreseen  for November  1996. 

The Joint Commission (planned for December  1996) can then endorse a set of priorities for 
action  and  establish  a  detailed  programme  of  activities.  The  Joint  Commission  will  in 
subsequent years be able to review the progress made. 

3.2.2  Working through the priorities 

As soon as priority areas for  action have been jointly established  on the basis of proposals 
outlined above, it will be possible for the working groups to  start their activities.  With the 
information  collected in the discussions outlined above, each group will be able to establish 
its targets.  These targets may include the: 

need to build a better understanding each others position; 
possibility of focusing financial resources to help eliminate a problem; 
utility of negotiating some kind of sector agreement or arrangement. 

The  exact  number  and  membership  of  the  groups,  as  well  as  the  substance  of  the 
discussions would be fixed jointly by the EU and India.  This stage of activity will therefore 
involve considerable trade facilitation,  and give greater impetus to the dialogue on detailed 
issues and providing substantive results. 

3.2.3  Increasing cultural understanding 

In  parallel  with  the  establishment  of  working  groups,  the  Commission  is  keen  to  help 
extend the EU-India dialogue to civil society (including trade unions and NGOs), the media 
and the academic community.  Without this spread of dialogue, the conduct of business and 
politics will always be hampered by a lack of broader understanding. 

This,  as was  noted  in the  Commission's  proposals  of July  1994 for  a New Asia Strategy, 
implies  a  strengthening  of  Europe's  economic  presence  in  Asia  requires  a  heightened 
European profile  in Asia.  It is not enough simply to do things, the EU must be seen to be 
doing them.  Hence, particular attention will be paid to improving the visibility of European 

13 

activities in India, where the sheer size and diversity of the country calls for  a special  effort 
in strengthening  profile.  The same is true in the opposite  direction,  where  India's  profile, 
and European awareness of the sub-continent, need to be increased. 

In this context the Commission intends to: 

facilitate cross-cultural co-operation initiatives; 
encourage  the establishment  a network  of organisations  interested  in Europe-India 
relations; 
promote an increased  flow  of press  and media information  on Europe in India and 
vice-versa. 

This  phase  of  activity  could  be  usefully  complemented  by  activities  launched  in  the 
European Parliament,  Economic and  Social Committee and the Committee of the Regions, 
if these institutions find it appropriate. 

3.2.4  Institutional  framework 

The resulting  series of sector agreements and arrangements are likely to push the existing 
institutional framework  to  its limit.  If and when a clear need to  prepare the ground  for  a 
new Framework Agreement emerges, the Commission will then return to the Council. 

14 

India  is  an  effective,  functioning  democracy  increasingly  open  to  the  world.  Structural 
reforms  are  continuously  strengthening  the  Indian  economy's  ability  to  face  opportunities 
and challenges in an international  framework. 

However,  there is no room  for  complacency  on either  side  A number  of challenges need 
to be tackled  and opportunities seized.  This Communication  therefore  underlines the need 
and  means to  reinforce  relations  between  the  EU  and  India,  expanding  on  the  experience 
gained  to  date,  taking  account  of the  need  to  adapt  to  changes  in India  and  the  EU,  and 
inviting an intensified  and more targeted dialogue. 

Indeed, on many points, notably those of an international political nature, the EU and India 
have a shared interest in tackling the challenges together, as both must face the same issues, 
and  the  growth  of  inter-dependency  means  that  neither  can  ignore  the  choices  made  the 
other.  The  scope  for  increased  growth  through  trade  and  investment  also  presents  an 
opportunity for each side, and requires assiduous work in tackling obstacles, and promoting 
awareness  of  the  possibilities  available.  Furthermore,  the  shared  values  of  India  and 
Europe,  vitality  of  cultures,  and  need  for  greater  mutual  understanding,  create 
opportunities for  cross-learning,  imposing an important  human dimension  on relations.  In 
all  these  ways,  the  challenges  which  are  of  joint  interest  can  become  tremendous 
opportunities for joint  benefit. 

Bearing  all  this  in  mind,  the  Commission  suggests  a  number  of  steps  to  reinforce  the 
relationship using the Co-operation Agreement between the European Community and the 
Republic of India on Partnership and Development, as well as the accompanying EU-India 
Joint Statement on Political Dialogue to their fullest.  Council and Parliament are therefore 
invited to comment on the analysis and proposals outlined in this text, and the Commission 
will  subsequently  move forward  in the framework  of the  existing  agreement  and  political 
declaration on the basis of these comments and in light of dialogue with the Gol. 

15 

Annexe L  l*ast Ell-India relations 

1.  The institutional  framework 

In addition to the historical and cultural links between the sub-continent  and  Europe,  India 
was, in  1962, one of the first countries to establish relations with the European institutions. 
These links were formalised  by agreements, the first one in  1973 aiming to  improve trade 
relations, and the two following including economic and development co-operation,  as well 
as trade. 

The current  Co-operation Agreement between the European Community and the Republic 
of India on Partnership and Development,  in force since August  1994, is a third generation 
co-operation agreement and is particularly broad in scope, covering: 

respect for human rights and democratic principles as an essential element; 
development and diversification  of trade and investment in mutual interest; 
encouragement  of understanding and strengthening  of ties between the two  regions 
in respect of technical, economic and cultural matters; 
building up India's economic capability to interact more effectively  with the EU, 
promotion of exchanges and communication between business communities; 
acceleration  of  India's  development  in particular  to  support  new  Indian  policies in 
key areas fostering  sustainable social progress and poverty alleviation; 
support for environmental protection and sustainable use of natural resources. 

2.  Political relations 

Political relations have been established with Troika ministerial meetings since  1982.  More 
recently  these  contacts  have  been  put  under  the  EU-India Joint  Statement on Political 
Dialogue,  adopted  at  the  same  time  as the  co-operation  agreement  in  1994,  and  which 
commits both sides to: 
-  defending  democracy,  human rights, peace and  a stable, just,  international  order  in line 

with the UN Charter; 

-  reinforced  co-operation  to  promote  prosperity,  economic  reform,  liberalisation,  free-

trade and economic stability as well as social progress and cultural links; 

-  allowing each others' interests to be taken into account in decision-making procedures, 
-  a better  mutual  understanding  to  increase  co-operation  on  international  questions  such 
as non-proliferation,  the fight against terrorism,  drug trafficking,  money laundering and 
issues linked to international peace and stability. 

Some positive discussions have already taken place in this new framework,  although India 
has been cautious towards European  criticism on its human rights record  at the UN.  Also 
past  discussions  on  non-proliferation  have  made  little  progress,  as  India  affirms  that  the 
Non-Proliferation  Treaty  would  reinforce  the  privileges  of  those  who  have  recognised 
nuclear  arms'  stocks,  without  actually  tackling  the  need  for  elimination  of  the  stocks. 
Although  the EU has always recognised  the need  for  disarmament,  it  insists that  separate 
fora  exist  for  this issue,  and  that  there  is an urgent  need  to  prevent  further  proliferation. 
For  similar  reasons  the  EU  has  also  urged  India  to  facilitate  adoption  of  the  planned 
Comprehensive Test-Ban Treaty which is under negotiation,  as well as the negotiation  of a 
Cut-off Treaty (prohibiting production of fissile materials for weapon purposes). 

16 

3.  Trading  relations 

In  trade  terms  the  whole  of  the  EU  is  India's  largest  external  trading  partner,  being  the 
destination  for  26%  of its  exports  and  the  origin  of  30%  of  its  imports.  Nevertheless  this 
must  be  put  into  perspective,  as,  looked  at  from  the  EU,  trade  with  India  is  only  1.3%  of 
total  external  commerce.  This  reflects  the  relatively  modest  level  value  of  the  commerce, 
which  at  14 billion  ECU  is less than  EU trade with  Singapore  (16 billion  ECU) 
In terms  of 
investments,  Europe  slipped  behind  the  USA  from  1991-94  (in  1995:  EU  18.4%,  USA 
22.1%),  with  some  1322.4  million  ECU  of  investments  in  India  in  1995  (August  1994-
November  1995). 

The  main  priority  for  dialogue  and  the  largest  achievement  in  recent  years  has  been  the 
conclusion  of  the  Uruguay  Round  and  the  establishment  of  the  WTO.  Europe  and  India 
played  an important  part,  and  established  a close and  successful  collaboration  in Geneva  on 
a bilateral and multi-lateral  level. 

On  a  bilateral  level,  a  Memorandum  of  Understanding  concerning  the  export  of  Indian 
textiles  to  the  EU  was  agreed  in  December  1994.  This  increases  the  flexibility  of  the 
quotas  applied  to  certain  textile  imports  in the  phase-out  period  agreed  under  the  Uruguay 
Round's  Agreement  on  Textiles  and  Clothing. 
India  has  committed  itself  to  some 
liberalisation  of  its  domestic  textile  markets,  although  the  quota  system  currently  in  place 
seems  less  than  adequate.  Furthermore,  in  Maritime  Transport,  a  bilateral  agreement  is 
being considered  with  India. 

The  EU  has  also  recently  revised  its  Generalised  Schema  of  Preferences  (GSP)  and  under 
the  new  regime  India  is likely  to  lose  some  of the  benefits  it  held  in the  textile  and  leather 
goods,  but  will  gain  market  opportunities  in a number  of other  sectors,  as  more  developed 
countries,  such  as  South  Korea,  are  excluded,  and  other  countries  like  China  lose  benefits 
on  a wider  range  of  export  sectors.  This  is  all  the  more  important  given  that  India  is  the 
second  largest  user  of  the  EU's  GSP  facility  (after  China  and  before  Brazil),  having  an 
overall utilisation  rate of about 62%. 

4.  Economic  co-operation 

There  have  been  active  efforts  to  foster  mutual  understanding  and  to  facilitate  trade  and 
investment  using  economic  co-operation.  In  1995,  30.5  million  ECUs  were  committed  to 
economic  co-operation  with  India,  and  India  also  had  access  to  part  of  several  regional 
programmes worth  more than  70 million ECU.  The commitments  made in  1995 doubled  in 
a  single  year  the  amount  that  has  been  spent  on  economic  co-operation  with  India  since 
1976,  demonstrating  that this has become  a very dynamic part  of the EU's relations. 

The  1994  agreement  provides  for  a  very  broad-based  co-operation  in  various  economic 
sectors.  The  European  Community-India  co-operation  strategy  up  to  the  year  2000, 
agreed  at  the  Joint  Commission  in  November  1994,  focuses  support  on  reinforcing  the 
Gol's  efforts  at  economic  reforms  and  on  strengthening  the  interaction  between  European 
and  Indian  economic  operators.  Areas  particularly  singled  out  (with  emphasis  on  the 
private  sector)  include  energy,  telecommunications,  electronics,  information  and  satellite 
technologies,  standards,  intellectual  property,  investment,  agriculture  and  fisheries,  tourism, 
science and technology,  information  and  culture. 

17 

The  newly  launched  EU-India  Economic  Cross-Cultural  Programme  will  lay  the  basis  for 
a  much  greater  mutual  understanding  with  media,  academic  and  business  aspects 
Furthermore  the Commission  has initiated  a new  programme  to build  co-operation  between 
EU  and  Asian local  authorities,  called  Asia-Urbs. 

The  pan-regional  Asia  Invest  programme  combined  with  the  recently  opened  European 
Business  Information  Centre  in  Bombay  are  major  steps  to  raising  business  awareness  and 
promoting  private  sector  linkages.  These  efforts  are  also  backed  by  the  business 
community  using  the  Council  of  EU  Chambers  of  Commerce  (established  in  1982),  which 
provides  a forum  for  the European  and  Indian  private  sector  to  review  issues  and  initiatives 
of common  interest,  as well  as the Joint  Business  Forum. 

On  institution  building,  focus  has  been  given  to  work  on  standards  and  quality 
improvements  in  industry.  This  has  just  led  to  the  establishment  of  an  Indian  Quality 
Control  Council,  and  co-operation  on property  right protection  is starting. 

On  business  to  business  co-operation,  the  Commission  has  promoted  technology  transfers 
in  different  sectors  including  agri-business,  transport,  energy  and  environment.  The 
Commission  and  Gol  have  also  set  up  the  3SE,  which  in  particular  aims  at  economic  co 
operation  in information  technology  projects. 

These economic  co-operation  measures  have been backed  by assistance  from  the  European 
Community  Investment  Partners  scheme, which  since  1990  has provided  some  10.6 million 
ECU  to  assist  77 joint  venture  activities  in India,  initiated  primarily  by European  small  and 
medium  sized  enterprises. 

The  first  steps have  also been  taken  to  support  regional  co-operation  in  South  Asia,  with  a 
number  of  projects.  A  further  step  is  now  being  taken  to  establish  inter-institutional 
collaboration  with  SAARC through  the  establishment  of  a Memorandum  of  Understanding 
on  Administrative  Co-operation  between  the  EU  and  SAARC,  focusing  on  exchange  of 
information,  staff training and technical  assistance. 

5.  Development  co-operation 

The  EU  is  the  second  largest  bilateral  aid  donor  to  India  (16%  of  total),  and  the  largest 
grant  donor  (60% grants).  The main part  of EU  aid (about  800 million  ECU  annually) is by 
the  member  states  directly  with  Germany,  the  UK,  and  the  Netherlands  in the  lead.  Funds 
from  the  European  Community  budget  represent  10-15%  of  EU  assistance,  almost  on  a 
level  with  Dutch  funding.  This  Commission  co-ordinated  development  co-operation  with 
India in  1976 and  since then well over  1.6 billion ECU  have been  committed.  This action  is 
added  to  by  the European  Investment  Bank  which,  from  1993  to  1995,  agreed  to  lend  55 
million  ECU  for  projects  in  the  power  generation  sector.  This  makes  India  the  largest 
recipient  of European  Community  aid in the developing  world. 

In  the  past,  funding  particularly  aimed  at 
increasing  and  diversifying  agricultural 
production.  Projects  included  development  and  rehabilitation  of  irrigation,  improved 
sustainable  use  of natural  resources,  and  support  to  the  agri-food  industry  and  markets.  In 
addition,  reforestation  has  been  financed  as  a  priority  in  its  own  right.  One  lesson  drawn 
from  these  projects  has  been  that  agricultural  pricing,  trade  and  markets  must  be  freed  if 

18 

real  progress  is to  be  made.  It  is not  enough  simply  to  improve  access  to  funding  and 
technology, the key signal must come from a change in policy. 

Hence, since  1993 there has been a change of track,  and human resource development  has 
become top priority, funding  a primary education programme which gives special attention 
to female  education.  This is the biggest  Commission-run  programme  of its kind,  and  is a 
model of policy reform  support.  This new co-operation  strategy has been confirmed  since 
then in a Joint  Commission  with the Gol,  which  established  that  up to  the year  2000  co 
operation should be focused on: 

access of the most deprived to productive resources 
basic social services. 

In addition, the Commission has sought to multiply the impact of its own support by: 

concentrating efforts  on a limited number of programmes of a certain critical mass; 
encouraging private sector participation. 

It is also  of note  that  this  strategy  is in line with  that  undertaken  by the  Bretton  Woods 
organisations. 

Finally,  there  has  also  been  an  increasing  trend  in  recent  times  to  develop  projects, 
integrally  involving  local  groups  in participate  mechanisms.  Experience  shows that  local 
support  is essential to  establishing  sustainable development  projects.  One means to  reach 
such participation has been the use of Non-Governmental Organisations, particularly local, 
which have shown to he the most effective  partners in fighting poverty alleviation at grass 
root, and in helping to improve social and human  rights. 

AttïtexeX  Itlie tïïdia» ec&nomy 

1.  International GNP league table, 1993 

Billion 
US$ 

USA 

Japan 

China 

Canada 

tlraill 

Kuiila 

Korea  Mndco  Aurtralia 

India 

Swlii  Argentina  Indoneita  Turkey 

Source:  World Bank Atlas 1995 

2.  Evolution of Indian Gross Domestic Product 1980-94 

8000 

H7000 

6000 

5000  Billion 
Rupees 
lit current 
prices 

-4000 

H3000 

2000 

1000 

0 

Year 

1980-81 

1985-86 

1990-91 

1993-94 

Source:  World Bank, India Country Economic Memorandum, 1995 

3.  Annual % GDP Growth in India  1989-1995 

1991 

1990 

1989 

Year 

Source:  Asian Development Bank, Asian Development Outlook 1995 and 1996 

20 

I.  Breakdown of employment and GDP by type of nctivify  isi 1993-94 

%  of  total 
«DP  or 
Labour  Force 

13 Afcràulture 
•  industry 
E& Services 

Labour Force 

GDP 

Source:  World Bank, India Country Economic Memorandum, 1995 

5.  India's External Debt, 1990-94 

1990-91 

1991-92 

1992-93 

1993-94 

1994-95 

Year 

Source:  World Bank, India Country Economic Memorandum, 1995 

21 

Aa»e*eX  Population  * s \ « ^\ 

; VÇ  î ^ % S î 5 P ^ f K J M J ^ G^  ^ v f ^ ; lt 

1.  Estimated  Indian population  1960-2000 

Million 
people 

1960  1965 1970 1975 1980 1985 1990 1995 2000 
est. 

Year 

Source:  World Bank, India: Trends, Issues and Options, 1990 

2.  Other population features 1970-93 

Indicators 

unit 

1970-751 

1980-85' 

I988-932 

density 

inhab/km2 

188.8 

232.1 

267.7 

annual  growth 

% 

fertility 

index 

births/woman 

infant  mortality 

per  000 

life  expectancy 

year 

2.2 

5.4 

132 

50 

2.0 

4.5 

106 

55 

2.0 

3.7 

80 

61 

Source:  World Bank, India Country Economic Memorandum, 1995 

1  Latest single year 

Most recent estimate 

22 

1.  Evolution of India's Trade with the World 

Imports' 

Exports1 

Deficit3 

1980-81 

1990-91 

1985-86 

1993-94 

Year 

Source:  World Bank, India Country Economic Memorandum, 1995 

Imports^ Imports of goods and non-factor services 

Exports^- Exports of goods and non-factor services 

Deficit  Deficit on resource balance 

2.  Destinations of Exports and origins of Imports for India, 1994 

30 

25 

20 

%  of total 
15  exports or 

imports 

10 

Japan 

Economic Survey, Ool. 

Source. 
Ex  Export destination 
Inv- Import origin 

The EU (as well as OPEC) was still beneficiary  in its trade balance with India for  1994.  The situation was 
the opposite for the US and in a lesser extent for Japan. 

23 

Anaexe &  Evolution of foreign Investmeat i& ïadïa 

Direct foreign  investments approved by Indian authorities 1991-1995 (in million 
ECU & %/total) 

1990-91 

1991-92 

1992-93 

1993-94 

1994-95 i 

ECU 

43.6 

% 
33.8 

ECU 
119.9 

% 

ECU 

12.6 

399.1 

% 
18.0 

ECU 

% 

656.4 

18.5 

ECU 
1322.4 

% 

18.4 

EU 

USA 

43.7 

33.9 

284.6 

29.9 

868.2 

39.2 

872.0 

24.6 

1585.9 

22.1 

Japan 

13.0 

10.1 

152.6 

16.0 

64.4 

2.9 

100.2 

2.8 

374.8 

5.2 

NIU* 

4.9 

3.8 

109.8 

11.6 

258.1 

11.6 

122.7 

3.5 

173.1 

2.4 

950.4 

129.2 

Total 
invest 
the  4 
as% 
of tot. 
Source: SIA Newsletter, Ministry of Industry, Gol 

79.6 

69.1 

2215.4 

3546.8 

7180.8 

71.7 

49.4 

48.1 

+ All years are from August to July of year indicated, except  1995 which is August to November (ie  16 months) 
*Non-Resident Indians 

24 

1.  EU-India Trade Flows 1990-1994 

1994 

1993 

Year 1992 

1991 

1990 

•  EU trade surplus with  India 
E3EU imports from India 
•  EU exports to India 

0 

1000 

2000 

3000 

4000 

5000 

6000 

7000 

8000 

Million 
ECUs 

Source: 
Note:  total EU external trade grew by approximately 20 % from 1990 to 1994, compared with 32% growth for trade with India. 

Eurostat 

2.  Recent trends in EU imports from India, 1990-1994 

Products  or product  groups 

1990 
in Million  ECU 

1994 

in  Million 
ECU 

%/1990 

Textiles /  clothes 

1,434 

2,206 

Leather  articles  /  skins 

Precious  stones 

Agri  / marine  products 

Engineering  /  electronics 

Carpets 

Food products  and live  animals 

Chemical  products 

Machines/transport  material 

713 

604 

594 

376 

204 

452 

182 

171 

1,001 

707 

889 

766 

262 

712 

416 

427 

Manufacturedproducts/raw  material 

1,723 

2,362 

Different  manufactured  articles 

1,514 

2,481 

Source: 

Eurostat 

25 

54 

40 

17 

50 

104 

28 

57 

127 

148 

37 

64 

3.  Recent trends EU exports to India, 1990-1994 

Product  groups 

b ood products/li  ve  animals 

Oils, animal 

fats/vegetables 

Chemical  products 

1990 
in Million  ECU 

1994 

in  Million 
ECU 

% rise  on 
1990 

9 

3 

554 

60 

5.5 

746 

Jewellery  (pearls, precious  stones,...) 

1,540 

2037 

Manufactured  goods 

2,220 

2843 

Machines  and  transport  material 

1,965 

2552 

Source:  Eurostat. 

560 

84 

35 

32 

28 

30 

4.  Principal European Partners for India -1994 

Exports  (destinations) 

Germany 

Million 
ECU  % 
25 
1760 

Imports  (origins) 

Germany 

Million 
ECU  % 
26 
1738 

United  Kingdom 

1649 

24 

United  Kingdom 

1687 

25 

Belgium-Luxembourg 

862 

12 

Belgium-Luxembourg 

1610 

24 

Italy 

France 

Source: Eurostat. 

848 

12 

France 

743 

11 

Italy 

763 

11 

594 

9 

26 

Aa»e*e V i H^  Jaifcrtittj^^ 

189M6 (\mimth'^ 

1.  International Financial Assistance to India in 1995 (indicative  figures) 

UN system 4% 

Source:  World Bank 
Total indicative assistance $ 6.7-6.9 billion 

2.  Breakdown of total EU aid to India in 1995 (indicative figures) 

Other inc. EIB 
25% 

Source: 

European Commission 

27 

3.  Cumulative European Community assistance to India 1976-1995 (in million ECU) 

Years 

Econ. 

Coop. 

Food  Aid 

Development  Assistance 
Fin.  & Tec. 

NGO 

Human. 

Total 

Sub-total 

Assist. 

1976-1980 

2.10 

89.07 

3.93 

93.50 

186.50 

0.51 

189.11 

1981-1985 

8.48 

286.83 

11.04 

221.30 

519.17 

17.51 

545.16 

1986-1990 

14.48 

161.77 

25.90 

363.42 

551.09 

29.58 

595.15 

1991 

1992 

1993 

1994 

4.98 

3.73 

5.00 

72.33 

81.06 

86.04 

5.28 

35.16 

3.14 

13.17 

51.47 

0.32 

57.07 

9.42 

2.42 

0.01 

4.81 

164.00 

168.82 

2.04 

180.28 

6.54 

10.95 

17.49 

7.57 

27.48 

1995 est. 

30.50 

7.15 

72.85 

80.00 

0.30 

110.80 

Total 

77.66 

576.57 

67.51 

1,011.52 

1,655.60 

57.83 

1,791.09 

Source:  European Commission 

28 

ISSN 0254-1475 

COM(96) 275  final 

DOCUMENTS 

EN 

11 

Catalogue number  :  CB-CO-96-322-EN-C 

ISBN  92-78-05919-6 

Office for Officiai Publications of the European Communities 

L-2985 Luxembourg 

21