India's trade with six EU countries: Trends and patterns

Abstract

India and European Union trade relations go back to 1960s. Both sides started their bilateral trade relations after their first summit which, was held in 2000 and after that India-EU has gone through various rounds of summits and negotiations for improving the bilateral trade ties. As a result, Free Trade Agreement was agreed upon between them in 2007 but it is still not fully implemented. EU is India's largest trading partner which has accounted 14.8 percent in its total trade in 2011. The study has taken up six nations of EU namely Belgium, France, Germany, Italy, Netherlands and UK as these countries have a large average share of trade with India during 1996-2011. The study strives to find out the trade competitiveness and patterns of India with these six EU countries by using various indices like Trade Intensity Index (TII), Revealed Comparative Advantage Index (RCA), Revealed Symmetric Comparative Advantage Index (RSCA) and Intra Industry Trade Index (IIT). The study finds out that India's growth of exports are more as compared to imports towards these countries. Among EU's six countries, UK, Germany, Netherlands and France are the main trade partners of India. Regarding commodity composition, India's 'iron and steel', 'organic chemicals' and 'electrical equipments' are the main top ten export commodities and 'pearls and precious stones metals & coins etc', 'organic chemicals', 'electrical equipment', 'iron and steel', 'nuclear reactors', 'optical photos' and 'commodities elsewhere classified' are in the top ten import commodities of India from these six countries. Regarding RCA index of India with these countries commodities namely 'silk', 'cotton', 'articles of accessories' and 'articles of leather' and 'animals guts' have still remained in top position during the whole study period and with the severe effect of Euro crisis, some of the commodities lost their earlier place in 2011 like Indian 'cotton', 'tea coffee' and 'carpets'. RSCA index shows almost same results for these commodities. Then in the IIT index for 'chemicals and allied industries', 'wood and wood products', 'metals' and 'machinery electrical' accounted higher value of IIT index in 2000 but it has been decreasing in 2011. The study suggested that, there is diversification in goods and latest technology should be used to benefit from bilateral trade. There is still further scope to improve the FDI flows between India-EU. India should adopt policies which are open, attractive and investor friendly to enhance the FDI flows. There is a need to implement the FTA agreement at fast pace, for this there is great requirement of political will.