How Europe sees India

Ranjit Shastri, Managing Director, X-PM India writes an insightful article: How Europe sees India.

"X-PM India recently organised an "India Partnership Journey" for a group of European business executives, investors and consultants. They visited India (Delhi/Gurgaon and Bangalore) because now that the unipolar moment is behind us, the world is rebalancing and old trading relationships are getting disturbed. The question on business peoples’ minds in Europe -- and in the USA and Japan too -- is whether India can be a good and reliable partner?

The participants, who came from Germany, France, Sweden, the United Kingdom, Poland and Belgium, stuck with their initial view that India needs to work on its physical infrastructure and poverty alleviation, but they came away excited about India's rapid rise. They were particularly impressed with the energy and innovation that they witnessed in Bangalore.

Being a Reliable Partner and India's Alignment

The question of India's reliability is important in a world that is in transition. When a country is unreliable in a geopolitical sense, depending on it economically is imprudent because security trumps economics. 

Reliability is another word for trustworthiness, friendliness or alignment. It's a relative term: Europe may find Japan reliable, and it may find Russia unreliable, but North Korea may have the diametrically opposite view. In a world with two rival superpowers, as during the first Cold War, countries settle into an equilibrium of three blocs: two opposing blocs and one bloc that attempts to remain non-aligned, but which may tilt one way or another depending on circumstances. The same pattern appears to be emerging today. 

While many in India complain that the West has historically been an unreliable partner for India, many in the Triad (i.e., the USA, Europe and Japan) held the view that India's non-alignment made the country nonreliable. Things began to change during the unipolar era between 1991 and 2008. The 2007 speech by Japanese Prime Minister Shinzo Abe on the "Confluence of the Two Seas" (the Indo-Pacific) was a significant recognition of India as a partner for the Triad. In this speech, he envisaged that an "Arc of Freedom and Prosperity will be formed along the outer rim of the Eurasian continent." This was followed by the 2008 U.S.-India Civil Nuclear Agreement and a similar deal between India and France. At a 
geopolitical level, the Triad has recognised India as a reliable partner. 

Not only is it clear at a macro level that India is a friend of the Triad, but the same also appears to be true at the grassroots level. Our European visitors came away from the "India Partnership Journey" -- after extensive meetings with government officials, business leaders, and business advisors -- with very positive feelings about India as a friendly country where they can do business.

Alignment Leads to New Trade Flows

The war in Ukraine has accelerated a process of global realignment, most visible in various economic decouplings. For example, Europe has reduced its dependence on Russian gas. Similarly, the PRC's sabre rattling with respect to Taiwan has led to a steady decoupling with the USA, Europe and Japan, especially in the area of high technology (e.g. the cancellation of the UK's sourcing of 5G equipment from Huawei, Dutch restrictions on exports of its most advanced microchip technology to the PRC, etc.). India too has begun to decouple from the PRC because of its dispute with the PRC along the Tibetan border.

The new global alignment is not only driving decoupling, but it is also one of the key drivers for the strengthening of trading relationships with countries that are friendly (the concept of "friendshoring"). Europe will rely more on India and South East Asia for goods and services. India too will rely more on defence suppliers in Europe, the USA and India itself. India will likely play a central role in the important supply chains of the Indian Ocean because of its location near the major shipping lanes of the Indian Ocean. In fact, when you view the map of the Old World (Africa, Eurasia and Australia), India is literally at the centre.

Lessons from the India Partnership Journey

The European delegates on our "India Partnership Journey" gave the impression that they viewed neither India's historic ties with the Soviet Union nor India's sourcing of oil from Russia as a sign that India would be an unreliable partner for Europe. I think they understood that while India might be opportunistically taking advantage of cheap Russian oil, India cannot be said to view Russia as a reliable partner. They could see from the people they met that India's business community is focused on partnerships with European, Japanese and American companies.

Given the initial reactions of our European delegates when they first landed in India, I suspect that many European business leaders are still not aware of the key role that India will likely play in the twenty-first century. In fact, when they first arrived in New Delhi, our European visitors were still focusing on India's past rather than on its future. It was not until they reached Bangalore that they understood the magnitude of India's transformation and the opportunities that exist for Europe to learn from India's digital innovations. They were particularly excited by the digital transformation of India and the "India stack" that enables efficient money transfers and e-commerce. 

I think our European delegates got a sense of the growing economic and technological strength of India, and they understood that the signs of India's challenges (e.g. environmental degradation, poor sanitation, etc.) are part of India's growing pains. Surprisingly, there were few concerns about the deterioration of India's social fabric, democratic ideals and treatment of minorities. These topics may become increasingly important to foreign observers over time, particularly to those in the Triad."



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