European businesses see long-term benefits of investing & manufacturing in India

Poul V. Jensen, Managing Director, European Business & Technology Centre, is confident that the coming years will account for interesting times for the partnership between the European Union and India – paving the way for increased business cooperation.

IBT: How can India and EU bolster their trade as they look to reconstruct their economies in a post COVID-19 scenario?

Poul V. Jensen: The EU and India are both severely hit by the recent COVID-19 pandemic. However, at the recent EU-India Summit held on July 15, 2020, it was clear that both the EU and India are working on a coordinated response to deal with the economic consequences of the crisis.

The EU and India are natural partners. The EU, with its 27 Member States, is India’s primary trading partner in goods and services, crossing over € 100 billion in 2020. The summit reconfirmed that in a post COVID-19 scenario, the EU and India are committed to work towards balanced, ambitious and mutually beneficial trade and investment agreements, opening markets and creating a level playing field on both sides. It is encouraging to see that there is a push at the political level through a High-Level Ministerial Dialogue that can positively impact bilateral trade and investment relations, but which can also address multilateral issues of mutual interest.

In India, the European Business and Technology Centre (EBTC) has been facilitating Europe-India business collaborations since 2008. From cluster collaborations, showcasing technology through the European Technology Engagement Cell, setting up living labs, and support with regard to pilot projects, EBTC has been fostering Europe-India technology collaborations. In 2019, there were close to 6,000 EU businesses active in India. Also the bilateral Chambers of Commerce in India have been instrumental in attracting investments from their respective EU Members States into India for a very long time. The Business Support to EU-India Policy Dialogues Project is an initiative to further strengthen and increase business involvement and EU-India business collaboration in close coordination with bilateral chambers and EU Member State representations and bodies here in India. As the implementation partner of this EU-Project in India, EBTC has designed various activities, which can spur economic activity, including trade.

Since the last one year, the European Economic Group (EEG), which has been established as the single European business voice in India has seen a lot of traction. It has so far been able to focus on the post COVID-19 scenario for European businesses in India and has come up with recommendations on priority sectors for the European businesses in India. The EEG has also been mentioned in the EU-India Strategic Partnership: A Roadmap to 2025 to continue to give a coherent voice to European businesses in India and thereby boost economic trade.

IBT: At a time when there is a consensus across the world about the need to diversify supply chains and to look for alternative sources of production, India is trying its best to become the next factory of the world. To this end, it has undertaken a string of initiatives such as the “Aatmanirbhar Bharat”. What opportunities does this present for European firms, and in which sectors?

Poul V. Jensen: The disruptions witnessed due to the pandemic have affected global supply chains significantly. Despite certain challenges, this is a very fortunate time for India to leverage its strategic location in Asia and large market size to attract foreign investors including European technology businesses.

European technologies especially in areas of clean technology are very innovative and India has always looked towards Europe for its clean technologies. According to a recent analysis by EBTC’s Europe-India IP Forum, in 2019, Europe’s share in green technologies in India was 28%, while the domestic share only pertained to 11%. This points towards increased scope for co-creation of innovation and technologies which are relevant for and viable in the Indian market.

Countries in a post-pandemic world need to be self-reliant and self-sufficient. However, collaboration in a complementary manner is crucial for building resilient economies which also thrive on principles of green growth. “Atmanirbhar Bharat” could thus be a catalyst for more business partnerships between European and Indian players, if its underpinning principles are guided by and implemented in a collaborative manner – resulting in a win-win scenario for both the Indian economy and European investors.

The Business Support to the EU-India Policy Dialogues Project has proven to be a great initiative to support such EU-India collaborations in the sectors of Energy, Environment, Climate Change, ICT, and Urbanisation.

For businesses to thrive, countries in a post-pandemic world must not become protective. They still need to be open to trading and collaborating with each other, enabling the shift in supply chains that is bound to happen. The EU and India will continue to be good trading partners even in the “new normal”.

 IBT: What are the perceptions and expectations of companies in EU from India as a manufacturing destination? How are you looking at the current trend towards de-risking from China and the opportunities it offers for India?

Poul V. Jensen: By 2050, India is by some measures expected to be the world’s largest economy. India’s “Make in India” initiative is a strategy of great potential for European businesses to manufacture in India and businesses across different industries are already taking advantage of it.

Various multinational corporates headquartered in Europe have set up their manufacturing operations across India and also more and more invest in research and development here. Not only is the global ‘supply chain of innovation’ an appealing factor, but they are also enthused by the enormous talent and skilled human resources at comparatively low cost.

European businesses need to be prepared and willing to indigenize their technologies and solutions for the Indian market. Working with local partners and stakeholders in India is hence the best strategy to effectively adapt technologies and products for the India consumer.

While India is a price sensitive market, European businesses see the long-term benefits of investing and manufacturing in India. This opportunity is yet underexploited by European businesses and tremendous scope remains untapped. In the backdrop of reshuffled geo-political and economic dynamics at a global scale, this is a crucial time for both democracies (the EU and India) to reinforce existing ties and further increase their economic activity. India’s highly skilled labour force, and its own domestic market are two of the reasons why European businesses should increasingly consider manufacturing in India and also use it as a hub for exporting within the ASEAN region. Particularly for European SMEs, India remains a difficult market, though India’s improving ease of doing business points towards decreasing entry barriers in the future.

The Prime Minister of India’s address to the world inviting them to invest in India during the time of COVID-19 has been well received by European businesses. India, however, still needs to showcase concrete opportunities where businesses from Europe can explore partnerships and business cases, which also take into account various perceived risks in relation to intellectual property rights, financing, and legal enforcement, among others. What is crucial now is to really provide focused support for new entrants from Europe especially with regard to establishing proof of concepts.

Several initiatives by EBTC and the EU-Projects we are implementing are providing hands-on support and also novel approaches for setting foot in the market. For instance, we recently set up a ‘living lab’ in cooperation with IIIT Hyderabad and with support from the Ministry of Electronics and IT as well as the Smart City Mission, which facilitates proof of concepts in real-time environments based on specific demands.

IBT: How are Brand India and Indian products perceived in the EU? What nuances (business, cultural, otherwise) should Indian firms be cognisant of while tapping the EU market?

Poul V. Jensen: The “Made in India” brand is not yet highly visible in the EU. The EU27 imports of goods from India are at around € 39.55 Billion in 2020 and some of the key import sectors are gems and jewelry, engineering goods, agriculture and allied products, metal and metal products, leather and leather goods, textiles and clothing, mineral products, and chemical and allied products. Investments from India amounted to around € 50 billion in 2019.

The EU is the largest integrated single market area in the world and is providing various advantages to foreign investors including legal certainty and access to 27 different markets without trade barriers.

Moreover, when considering the diverse industries and sectors across Europe, there is still a lot of potential for Indian investors or business partners to explore and seize, especially with regard to IT services, pharmaceuticals, food-processing, value-based manufacturing, and logistics.

Culturally, Europe has a similarity to India, insofar that each country, like each Indian state, is unique – in its ways, its food, its language, and more. So an Indian company looking at tapping the European market must consider the fact that whilst EU trade-wise can be considered one, culturally, it consists of 27 individual countries with own characteristics. So to set up one office to cater to all of Europe, is as unadvisable as it is for Europeans to do that in India!

IBT: What, in your opinion, are the roadblocks that have stopped the conclusion of Bilateral Trade and Investment Agreement? How can these concerns be resolved in a way that is mutually beneficial for the two parties?

Poul V. Jensen: Trade deals as ambitious as the one EU and India are negotiating take a long time, a lot of negotiation and a lot of trustful agreement. The Bilateral Trade and Investment Agreement (BTIA) was again in the spotlight during the recent EU-India Summit. We must always remember, that a Trade Agreement is a tool to support trade, to support economic growth, by creating an environment where businesses can thrive. Businesses in general are hoping for an agreement soon, and we can all only hope for concrete movement within the negotiations.

 IBT: EU has developed a circular economy strategy for sustainable growth. What opportunities do you see for collaboration with India in this regard, and how can it benefit both countries?

Poul V. Jensen: The “EU Green Deal” is a policy reform of the EU and strives to make Europe the first climate-neutral continent by 2050. This ambitious strategy also entails the objective to achieve a 90% reduction of greenhouse emissions by 2050 by focusing on automated mobility and smart traffic management systems. The EU Green Deal is hence an important blueprint for investments and focus on environmental-friendly solutions and innovative solutions that also help improve global environmental standards and create new markets and jobs. This goes hand in hand with the recently issued Green Recovery Action Plan and ‘Next Generation EU’ recovery and resilience facility amounting to EUR 560 billion.

With India having ratified the Paris Global climate Agreement and having certain climate goals to achieve, green and sustainable recovery of India’s economy is a unique task for which Europe and its business community are the best partner. Already before, the EU and India have been collaborating on several circular economy initiatives and continue to do so. To name a few interesting and recent examples of EU-funded projects and partnerships:

• The EU-India Clean Energy and Climate Partnership aims to reinforce cooperation between EU and India on climate change and energy with a view to ensure a secure, clean, affordable and reliable energy supply for all and to progress in the implementation of the Paris Agreement.
• The EU-India Resource Efficiency Initiative strives to support India in the implementation of the UN Global Sustainable Consumption and Production (SCP) agenda. This will be accomplished by facilitating the adoption of international standards and business practices on resource efficiency.
• The India-EU Water Partnership facilitates cooperation between India and a flexible coalition of EU Member States on water-related issues of mutual interest by further developing the IEWP and foster business opportunities for EU companies having the technical know-how to contribute in improving the efficiency, effectiveness and sustainability of water management in India.
• The India-EU Urban Partnership: Sustainable urbanisation is one of the most active and high-profile sectors of cooperation between the EU and India. This partnership aims to promote and strengthen cooperation between the EU and India by sharing policies, technologies, business solutions, financing mechanisms and cooperation on research and innovation to support smart and sustainable urbanisation. The partnership interlinks with other EU-India policy dialogues and provides opportunities in the field of inter-alia, water, air quality, resource efficiency and circular economy, clean energy, energy efficiency, greening urban transport, ICT solutions, and climate change mitigation and adaptation in cities.

With all of these initiatives in place, the next 5 years will account for interesting times for the partnership between the European Union and India – paving the way for increased business cooperation.