India-EU Relation

The European Union is a political and economic union comprising primarily 27 member states in Europe. The Maastricht Treaty established the EU, which came into force on November 1, 1993. The basic objective of the EU is to promote cooperation and integration between its member countries and thereby improve economic stability and political stability within Europe. The EU has its own currency, the Euro, which is used by 19 of the member states.

What are the Recent Key Highlights in India-EU Trade?

• Exports:
  • India’s exports to Europe in FY24 are about USD 86 billion and merchandise exports to EU member countries stood at about USD 65 billion in 2021-22, while imports aggregated at USD 51.4 billion.
• Substantial Interest in Steel Exports: 
  • India’s iron and steel product exports to the EU increased to USD 6.64 billion in 2023-2024 and from USD 6.1 billion in 2022-23.
• Countervailing Duties:
  • In 2020, the US and EU imposed countervailing duties (CVDs) on some Indian exports, such as paper file folders, common alloy aluminium sheets, and forged steel fluid.
  • Countervailing duties refer to the tariffs imposed on imported goods to equalize the subsidies provided by the exporting country’s government in protecting the home industry.
• Government Initiative:
  • The commerce ministry is developing an institutional mechanism to scrutinize the refund of taxes given to exporters under the government’s duty remission scheme called RoDTEP to mitigate countervailing duties levied by leading importing nations.

What is RoDTEP Scheme?

• About:
  • It is a duty waiver scheme effective since 1 January 2021 and is a plan to increase export by removing the tax liability on the goods being exported.
  • It is managed by the Ministry of Finance, under the Department of Revenue
  • It has replaced the earlier Scheme in lieu of the export incentive scheme- Merchandise Exports from India Scheme (MEIS)
  • MEIS was pushed by a decision by WTO as MEIS Scheme was against the rules of World Trade Organization
• Objective:
  • The scheme looks to provide a wide-ranging support to the exporter by refunding different expenditures.
  • It would refund to exporters the taxes, duties, and levies that have been paid in the process of producing and distributing products and which cannot be refunded under any other scheme.
• Introduction of New Sectors Under RoDTEP:
  • The Government of India has made an announcement extending RoDTEP Scheme support more to the export sectors than ever before, like Advance Authorisation (AA) holders, Export Oriented Units (EOU), and Special Economic Zones (SEZ) export units.
  • Engineering, Textiles, Chemicals, Pharmaceuticals & Food Processing, among others are some sectors that this move is going to touch.
• Financial Allocation:
  • Since its launch, the RoDTEP Scheme has already supported over 10,500 export items with an amount of Rs 42,000 Crores.

India-EU Relationship Evolution and Challenges

Evolution of India-EU Relationship

• The relationship between India and the EU has evolved over the years, with the EU being India’s largest trading partner.
• Key events include the establishment of the Cooperation Agreement in 1994, the first India-EU Summit in 2000, the Joint Action Plan in 2005, and the renewed dialogue in 2017.

Areas of Cooperation

• Free Trade Agreement (FTA)
  • From negotiating a Free Trade Agreement (FTA) to being broadened to address geostrategic and economic challenges.
• Trade and investment cooperation:
  • The EU is India’s largest trading partner, having trade in FY24 are about USD 86 billion.
• Investment:
  • The EU is a major source of investment for India. The share of the EU in foreign investment stock went up from about €63.7 billion in 2017 to over €87.3 billion in 2020.
• Infrastructure development:
  • The EU has supported India’s plan for modernizing its infrastructure, including financing of projects in sectors such as energy and transport.
• Political strategic partnership:
  • The EU and India have a strategic partnership, which includes regular high-level political dialogue and cooperation on issues such as counter-terrorism and non-proliferation.
• Development aid:
  • The EU has offered development aid to India, with support for initiatives in health, education, and agriculture.
• Cooperation on terrorism, cyber security, and climate change:
  • The two have cooperated on several conferences and workshops on cyber security and efforts on combating terrorism.
• Cooperation in security matters:
  • EU and India have collaborated in regional and global security issues, through the United Nations and other multilateral organizations.
• Research and innovation:
  • This has been well collaborated between the EU and India on scientific research and innovation; for instance, Horizon 2020 of the EU.
• Cultural and educational exchange:
  • Amongst the major cooperation areas lies cultural and education exchanges between the EU and India like Erasmus+.
• Multilateral cooperation:
  • The European Union and India should cooperate under multilateral forums at the United Nations, the World Trade Organization, and the G20 to promote shared values towards global challenges.