Dr Charles Tannock

Member of the European Parliament for London

EU-India relations-A new Strategic Partnership

EICC-CBC-GOPIO Conference - 9th November 2005

One of my proudest achievements as a Member of the European Parliament was to co-found three years ago the informal Intergroup, Friends of India. Since then India has gone from strength to strength continuing to grow at 7.5% annually and is now a strategic partner with the EU, which I warmly welcome. India is now firmly on the path to self-sufficiency and a more open economy and the EU is keen to link into this.

The country I know best, the UK, for obvious historical reasons has been leading the way in building links with India. Indian businesses have naturally chosen Britain over other locations in Europe for reasons of language and cultural ties but even that is now slowly changing. Therefore still some sixty per cent of Indian investments into the EU come to Britain but of course 40% goes to other EU member states and that share is rising ; Britain is the third biggest investor in India. For instance Vodafone made the largest single FDI this October in Bharti mobile phones by taking a 10% stake for $1.2 billion as a vote of confidence that this sector is bound to expand with the economy growing as it is. Today India still has only a mobile phone penetration of 6% of the population or 64 million subscribers covering only 20% of the country compared to close to 100% in parts of the EU. Vodafone aims to cover 75% of the country by next year. India remarkably has the lowest voice tariffs in the world at 2.5 US cents pr minute.

Following the recent success of the open sky policy, British Airways has doubled its flight to Mumbai. There were 19 flights a week to India in 2003, this went up to 45 flights a week this year and is set to touch 115 next year.

However it is not only improved air links that is bringing the EU closer to India but our shared set of values about human rights, democracy and the rule of law. India remains a stable secular democracy, which therefore disproves the Chinese assertion that massive country size is an impediment to democracy and human rights.

Indeed even Prime Minister Manmohan Singh, who admires China’s economic discipline and which has averaged an extraordinary 9.5% growth for the last 30 years and lifted millions of Chinese out of poverty, has admitted that Indian democracy means that China under a one party communist dictatorship can be more focused in driving through large infrastructure projects where local protest would not be tolerated.

However this is a sacrifice India is more than prepared to make to safeguard its fundamental democratic freedoms. In fact it is a major problem for the Government of India which is reliant on support from the Left Front Communist Party. India’s communists unlike China’s are still ideologically motivated, and the Left Front is obstructing essential economic reforms, in particular resisting privatisation of state assets, lifting FDI caps particularly in the retail sector and will not even discuss creating a more flexible labour market.

The recent 29th September communist led general strike illustrates the scale of the problem. Nevertheless Prime Minister Singh has recently introduced a national state implemented VAT system similar to the EU´s and encouraged public private partnerships for road building financed through toll charges, as upgrading transport links is essential for such a large country and a renewed focus on helping the rural poor share the benefits of growth will be a priority for the Sonia Ghandi/Manmohan Singh leadership.

Certainly there are huge economic differentials among and within States, both of which are growing, with a widening disparity between cities and villages and the government will also have to address this. Nevertheless the essential reforms dating back to Singh’s tenure in 1991 including liberalising external trade and dismantling the “licence raj” system are still on track.

The Sixth EU-India Summit in New Delhi on 7 September between EU Council President UK Prime Minister Tony Blair, Commission President Barroso and Prime Minister Manmohan Singh was a great success, with the signing of the joint action plan for an EU-India strategic partnership, bringing Europe and India relations closer than ever before. The plan includes provisions for joint work against terrorism, a security dialogue, an emphasis on human rights, and measures to promote trade and investment.

It was emphasised at the summit that India, under its strategic partnership with the EU, enjoys closer commercial and political relations with the West because we all share the same fundamental values.

Furthermore the EU-India strategic partnership will set up a high-level group to study differences over intellectual property rights, anti-dumping and non-tariff barriers. It is clearly in India's interests to join forces in the WTO negotiations to lower protectionist barriers, particularly in services such as accounting, law and finance, as this will free up trade and generate greater investment flows.

Thus I predict that within twenty years India will overtake China as an economic superpower, and this is a view shared by the USA which has been improving relations with India and distancing itself from its traditional cold war ally Pakistan due to its ambivalence in the war on terrorism and through the nuclear bazaar run by AQ Khan encouraged nuclear proliferation to rogue states like North Korea and Iran, both implacable enemies of America. Nevertheless I welcome the Indo-Pakistani confidence building measures and the more relaxed approach between these two large neighbours who 5 years ago were on the brink of nuclear war. I hope the recent terrorist bombings will not point the finger at Pakistani involvement as some have alleged. For instance we now see transport and sporting links and most recently following the tragedy of the earthquake in Kashmir the humanitarian assistance and border opening facilities that both sides have allowed, and today was marked by the symbolic opening of the border crossing at the Line of Control.

It is not always appreciated that India now has a 220 million-strong middle class with serious purchasing powers and in fact India-EU trade volumes touched USD 35.37 billion last year making the EU India’s largest trading partner and trade volumes are growing at an astonishing 20% per annum. We have to recognise the enormous size of this combined market of some 1.5 billion people, which represents some 22% of the globe’s population. Currently India represents 17% of global population but only 2% of GDP so the growth potential is enormous. India recently bought Airbus, and in my country we are outsourcing call centres and even healthcare to India, which I – unlike my UKIP colleagues in the European Parliament – welcome. The largest outsourcing company relaunched itself as Genpact in September and expects to exceed USD 1 billion by 2008. Of the more than 400 Indian companies operating in the UK for instance, around 340 are in IT and communications and companies like Tata Consultancy, Infosys, and Wipro are world leaders. Indeed, there are more Indian companies listed on the London stock exchange than in New York or the NASDAQ.

India has benefited with China enormously this year from the ending of the Multi Fibre Arrangement and has a booming textile sector but it would benefit even more if employers were not so hampered by archaic labour laws. Obviously here in the EU politicians such as me who support free trade have a duty to resist protectionist calls from southern European textile manufacturers who have not restructured in spite of ample warnings over the last decade to do so. I regard the growth in India not as a competitive threat but as a golden opportunity, which will benefit everyone as the global economy grows. It is not a zero sum game but the challenge will be explaining the logic of this assertion to our EU partners particularly countries like France resistant to globalisation and keen on building a “Fortress Europe”.

India, though, still only represents 1.5% of the EU's external trade, compared to the EU representing some 20% for India, so the growth potential remains enormous on both sides when compared with say China now the EU’s second largest trading partner. More could be done to facilitate so-called GATS Mode 4 issues, concerned with free movement of skilled professionals – particularly research scientists – and India to its credit is now participating in the EU’s Galileo project, which will be an alternative to the U.S.’s GPS system.

On the Foreign Affairs Committee I was responsible for the amendment to the Menendez del Valle Report on EU-India relations asking for India to be granted privileged status in the exchange of information with Europol in fighting terrorism and the 29th October terrorist attack in Delhi makes this all the more urgent. I was pleased that the security issue was raised at the EU-India summit.

In this respect I also thank India for in spite of its Communist Party protests it still voted with the US and the EU on an IAEA resolution on Iran's nuclear programme, as Iran with a nuclear weapon poses a serious threat to the entire region. In the Parliament I also succeeded in getting passed my amendment stating that India deserves its own dedicated European Parliament delegation.

After all India, in its multilateral foreign relations, plays a unique role in its part of the world in a series of concentric circles through its regional relations with SAARC, ASEAN and the GCC and the UN where I personally strongly support UN permanent Security Council non veto membership for India as well as Japan. Its role in peacekeeping with the UN makes it the largest contributor to UN forces with almost 70 000 military personnel involved in 41 different operations.

Lastly I believe that with the enormous problems the EU is facing in coming to terms with the rapidly changing face of its societies and we have witnessed the appalling scenes of rioting in France for the last two weeks in this context and therefore how to successfully integrate the newly arriving communities living in our midst means that that we have a lot to learn from the success of the Indian multicultural model. India with a Muslim President, a Sikh Prime Minister, a Hindu Foreign Minister and a foreign born Christian President of the ruling Congress party is a remarkable success story as a country, which we in the EU all need to understand a lot better!