international analysis and commentary

India and the EU: some parallels, no partnership

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The leitmotif of Indian establishment thinking about the European Union has traditionally been: great economic success, too bad about the foreign policy.

Curiously, when the European Union experienced what was its worst economic experience, the so-called eurozone crisis, New Delhi’s opinion did not change. India’s establishment remained relatively confident that the euro would survive. There was even less expectation that the European Union itself would be torn asunder.

But Europe’s inability to have a material impact on any number of global security concerns – such as the Syrian civil war or the Iranian nuclear issue, Sino-Japan territorial disputes and most recently the Russian takeover of Crimea – reaffirmed an existing Indian belief that when the going gets tough, Brussels is not the place to go.

New Delhi’s primary concern regarding the eurozone crisis was the impact it was having on an Indian economy that had begun slowing soon after the Lehman Brothers collapse. Suffering from current account woes, the fall in demand for Indian exports to Europe was exactly what Dr. Manmohan Singh, the outgoing Indian Prime Minister (and an economist by training), would not have prescribed.

While the Indian Finance Ministry did prepare contingency plans to buffer the Indian economy from the expected shockwaves of a Greek exit from the eurozone, and even a larger fiscal meltdown of the European economy, the latter in particular was generally seen as unlikely within the Indian establishment.

Singh also joined other BRICS nations and Mexico in pledging $10 billion each of their foreign reserves to the International Monetary Fund’s “firewall” against a European meltdown at the sidelines of the G20 summit in June 2012.

But again, the idea of a eurozone breakup, while discussed academically and examined more in terms of its lessons for India, was never treated as a likely event. This may have reflected the fact that New Delhi, having much experience in running a fractious polity and hiccup-prone economy, had a better sense of how resilient a federal (or in the case of the EU, quasi-federal) polity can be in a crisis.

The eurozone crisis even became a useful excuse for Singh to explain his second ineffectual second term. Recently, with his prime ministership set to end, Singh blamed the outside world: “I have done reasonably well; the growth process has been sustained despite the global crisis, despite the eurozone crisis.”

Indeed, though annual bilateral trade in goods and services amounted to just over €100 billion in 2012, the European Union has dropped to being India’s second largest (aggregate) trading partner, after the Gulf Cooperation Council.

The combination of India’s slowing economy and Europe’s political and economic turmoil also meant that the key bilateral economic issue between India and the European Union, the negotiation of a bilateral free trade agreement, has remained on hold.

Although both Indian and European diplomats insist differences are quite small, they are differences that intertwine with domestic EU politics. Brussels has taken a hard line on data security – a sensitive issue after the recent Edward Snowden revelations of widespread electronic surveillance by the US. EU authorities have also declined opening up to “Mode 4 services”, which would allow Indians to take up temporary work on European soil – something that is proving difficult at a time of widespread European unemployment.

With both economies struggling, neither side is in the mood to be generous on this front. As the Indian envoy to the European Union, Manjeev Singh Puri, noted in March, his country now suffers from “a domestic environment that does not favor FTAs in general.”

India continues to have numerous foreign policy concerns, but has not seen the European Union as part of the solution to any of them. A priority for India has been how to manage relations with an increasingly powerful but unpredictable China. In response, India has recently upgraded its relations with Japan and the countries of Southeast Asia.

The stability of the Afghanistan-Pakistan theatre is another Indian preoccupation. New Delhi is in intense conversations with many countries including Russia, China, Iran and the Central Asian states because of the imminent US troop withdrawal. The Afghan gambit was one reason why when Russia invaded Crimea and the Ukraine crisis broke out, India preferred to be at least rhetorically supportive of Russia. New Delhi saw the Western decision to support the overthrow of the previous Ukrainian government as poorly conceived. Brinkmanship makes tactical sense if there is some plan to handle the fallout if the other side were to call the bluff. That European officials seemed completely surprised by Vladimir Putin’s actions, while no one in New Delhi was, further strengthened a sense of a Brussels out of touch with the ways of Realpolitik.

At the heart of all this is New Delhi’s concern that President Barack Obama’s isolationist tendencies have seen the US pulling back from its traditional role as an international public goods provider – even deliberately seeking to avoid involvement in major global trouble spots. Like many regional powers, India is struggling to stitch together its own solutions to the problems that matter to it the most: the European Union, after the eurozone crisis, is not seen as having even a financial role in solving most of them. In much the same way, presumably, Brussels does not see India as a useful player when it comes to most of its foreign and economic policy problems.

India, however, does maintain healthy relations with individual European countries. The United Kingdom, though of dwindling interest to a younger generation of Indians, remains the country most Indians associate with Europe. London has become the preferred destination for Indian companies when they invest or set up offices in Europe. India is now the fourth largest FDI investor in Britain. As British Prime Minister David Cameron noted, “Indian companies invest more in the UK than into the whole of the rest of the European Union.”

If New Delhi completes its planned $10 billion purchase of French Rafale fighter aircraft, for example, it will effectively join the Indian and French defense sectors at the hip.

There are also ties developing with second tier European Union countries. Belgium has emerged as India’s third largest trading partner in Europe, supplanting both France and Italy. Even Poland has sought to position itself as India’s political partner within the European Union.

There has been little Indian commentary on the rise of anti-immigrant political movements in Europe. Indians have never seen continental Europe as an immigration target. Educated Indians have preferred English-speaking nations while working class Indians have tended to go to the Persian Gulf or Southeast Asia. Italy is the only continental European nation with a sizeable Indian migrant population and even there Indians make up only the eighth largest migrant population in the country. Curiously, even the fact the United Kingdom has almost closed off immigration from India over the past few years has not aroused much Indian concern. This may be because the United States, Canada and Australia, inspired by Indian entrepreneurship in places like Silicon Valley, have deliberately sought to woo Indian immigrants in ever-increasing numbers.

Again, there are some minor exceptions. India has become the single largest source of non-asylum migrants for Sweden in the past two years. Indian migration to Finland has also risen.

India and the European Union have both seen their economies struggle and their security environment worsen in the past few years. Looking beyond the short-term and seeking cooperation at a higher level is proving to be a luxury. The return of the Indo-EU relationship to the predictable and the mundane should not be a surprise, nor should the notion that Indians see a bit of Europe reflected in their own present condition.