Analysis: IT sector key to liberalising EU-India trade

In December, Brussels hosted the 11th round of negotiations between the Indian government and the European Commission (EC) on a free trade agreement (FTA) that would allow both regions to trade goods and services without being hindered by harsh tariffs or import duties.

However, once again, no firm commitments were made.

Neelie Kroes, EC vice president and European Commissioner of the Digital Agenda, believes an FTA would have a big impact on Europe’s IT sector, and that 2012 will be a crucial year for furthering discussions. “The EU ICT industry employs more than 40,000 people in India and EU-India trade is growing strongly. In fact, the EU is India’s number one export destination and the EU is India’s number one foreign investor,” said Kroes.

“This relationship would be greatly boosted by an EU-India free trade agreement, which would bring €9bn [£7.4bn] in total benefits, virtually evenly split between EU and India,” she added.

Kroes is confident that this year will see real progress.

“I agreed with Indian Telecoms Minister Sibal in November that EU and India should cooperate more closely in R&D, internet security and regulation. There will be a high-level dialogue in February, with results expected in six months.”

An FTA would allow European technology firms to more easily tap into the strong Indian economy, which has more than a billion consumers and a growth rate of between eight and 10 per cent. To improve the chances of settling an FTA with the Indian government, the EC has also decided to invest nearly €500,000 in a project called EU-India Fostering Cooperation in Computing Systems (EUINCOOP).

Set up in October, EUINCOOP is a consortium of European and Indian organisations that advises both governments on technology research and investment. Last week the organisation received a boost when IT standards body The Open Group and the Interactive Technology Software and Media Association both joined.

Ovum analyst Joe Dignan believes initiatives like EUINCOOP can play a vital role in establishing an FTA, because so many of the links between the EU and India relate to technology.

“EUINCOOP has to be seen in the context of the long-delayed and much sought-after FTA that the EU has been attempting to negotiate with India for a long time now,” said Dignan.

“The bottom line is that Europe is very keen to get rid of India’s highly complex system of permits and licences that makes it very difficult for foreign companies to operate in India. Out of 183 economies, India has been ranked 165th in terms of ease of doing business,” he added.

“This project is integral to setting up an FTA. There are major tech companies in India, such as TCS and Infosys, which are hoping to expand in Europe and want a level playing field with European companies. Similarly, the EU is hoping to get access to the massive Indian market.”

But what sort of recommendations could EUINCOOP make that would speed up and secure an FTA agreement?