Why Europe is Coming to India

  • Share
  • Read Later

For a European Commission ambassador, introducing European businesspeople to your host country is a big part of the job description. Since E.C. ambassador Danièle Smadja arrived in Delhi two months ago, she has found herself shepherding a half-dozen delegations of eager European executives and politicians every week. "All my fellow ambassadors are always either receiving or sending off visitors," she says. "India is like a beautiful woman being wooed by many suitors at the same time."

Increasingly, those suitors are whispering sweet nothings in European accents. So far this year, European bigwigs including German Chancellor Angela Merkel and London Mayor Ken Livingstone have come calling, while French President Nicolas Sarkozy will be chief guest at India's Republic Day celebrations next January. On Nov. 30, E.C. President Jose Manuel Barroso and European Union President and Portuguese Prime Minister Jose Socrates will visit New Delhi for the annual E.U.-India summit, a bilateral confab to discuss investment, scientific cooperation and efforts to combat climate change. The participants are expected to announce a joint solar energy project and the formation of a European Business and Technology Centre in Delhi.

With annual bilateral trade estimated at $85 billion — nearly a fifth of India's total — the E.U. is India's largest investment partner, and its largest source of foreign direct investment. It's also the largest recipient of Indian investment, thanks largely to conglomerate Tata's $12 billion acquisition of Anglo-Dutch steelmaker Corus earlier this year. The E.U. and India are currently negotiating a free trade agreement as well as a comprehensive trade and investment agreement. These and other deals have European executives coming in droves, drawn by the country's 9% annual economic growth, along with its fast-growing middle class and booming trade, services and investment sectors.

But the E.U.'s growing interest in India, some analysts say, is also an attempt to avoid putting all their eggs in China's basket. "There is a degree of apprehension over the fact that European [multinationals] are too deeply entrenched in China," says Rajendra K. Jain, professor of European Studies at Delhi's Jawaharlal Nehru University. "There is also concern in Europe over issues such as intellectual property rights violation in China; some 70% of European fakes come from China." Jain says India, whose growth, unlike China's, has been primarily domestically driven, is beginning to look more promising. "The E.U.'s calculation is that getting a firmer hold and greater market access in India will be more fruitful in the longer run," he says, "providing the enabling environment improves."

The last part is crucial. If India wants to keep the suitors coming, it will have to do more to reform its business climate and address foreign companies' concerns on everything from corruption to its tangled bureaucracy to widespread environmental, child labor and health issues. Earlier this month, a Norwegian sovereign fund withdrew investments from Indian-owned mining firm Vedanta Resources over its environmental practices in India. And big-box European chains like Carrefour are frustrated over the slow pace of reform in India's retail sector, where complete foreign ownership of multi-brand retail outlets is still not allowed. Partly to tackle such issues, Europe is helping to fund bilateral projects aimed at helping India develop much-needed infrastructure and improve its social indicators in an eco-friendly way.

But not all of India's visitors are European. The country has also hosted high-profile visitors like Russian President Vladimir Putin, Chinese President Hu Jintao and Brazilian President Luiz Inacio Lula da Silva this year. And among its "strategic partners" — a term India accords to countries whose long-term interests dovetail with India's — are not only the E.U., but the U.S., Japan, Russia, China, Israel and Iran. New Delhi, it seems, is flirting with all and promising marriage to none.