Following years of sometimes difficult relations over trade and political issues, the European Union Commission recently issued a new strategy paper aiming at a “strategic partnership” with India in five key sectors ranging from economics to development.

India’s circumstances and problems are so vast, they may defy comprehensive analysis and strategy. The EU approach therefore sometimes seems selective, short on detail and disjointed. But it does represent an effort to consolidate and increase attention on these myriad issues.

The strategy appears in some ways to be highly selective in topics to be developed between the two sides in the future. For example, it focused only sparse attention to such domains as space collaboration, in which the two regions, along with China, have entered into a potentially major undertaking on Europe’s Galileo space satellite navigation system that to some degree rivals the US GPS programme. In addition, a possible looming AIDS disaster and the EU concern is mentioned only in passing.

But in view of the domination of attention focused on other Asian states, the report is a useful reminder of the importance of India and Europe’s relationship with that vast country and region.

The document’s initial observation is that “India is metamorphosing dramatically and fast. Recent elections have shown its unique vitality, as those who felt left out of the striking economic development used their votes in a genuine demonstration of democracy.” It adds further that “India is attracting growing interest and attention as a regional and global leader and in the region and is engaging increasingly on equal terms with other world powers. The relationship with the EU, in particular has developed exponentially in scope and intensity in recent years.”

Noting the normalisation of relations with both the US and China, as well as the Association of Southeast Asian Nations (ASEAN), the communication remarks that there has been “a spectacular upturn” in India’s foreign policies in recent years. And it noted the “remarkable political breakthrough” in early 2004 with rival Pakistan and the South Asian Association for Regional Cooperation (SAARC).

The paper also points to the economic performance of India, remarking that “The Indian economy, long seen as lagging behind its East Asian neighbours, seems ready to follow China in a sharp breakout. Growth is expected to surpass 7% in 2004, led by the service sector, making India the second-fastest-growing economy in Asia (after China). India’s great advantage in the global marketplace – that it has a large pool of low-wage, educated, English-speaking university graduates – has made it the preferred global hub for software development and business process outsourcing.” But it notes, as the recent national election results seemed to also indicate, that “These benefits, however, have not been spread evenly amongst the people of India. The vast bulk of the population still live on less than $2 a day.”

It also notes that since the first EU-India summit in Lisbon in 2000, relations have increased substantially. It noted, for example, that between 2000 and 2004, there were 12 visits to India by EU Commissioners and the Foreign and Security Representative Javier Solana, not mentioning that there where nine Commission visit to China alone in the first half of 2004.

It proposes a general increase in contacts and efforts to enlarge this relationship in policy and strategic issues, especially in order to reinforce their participation and the role of the UN in conflict prevention, peacekeeping, counter-terrorism, anti-proliferation and all activities related to migration, including labour or human trafficking. It especially notes that since both were heavily involved and among the most active in UN peacekeeping operations, there should be greater cooperative efforts in this field. The proposals are sparse in the important field of proliferation, which should be a major concern in the region.

It also devotes some, but perhaps insufficient, attention to relations with the South Asia region, noting that improvement had recently taken place and there was an opportunity to increase the EU contribution to the process. There are nevertheless a number of proposals to develop contacts among officials, business leaders, academia and civil society. It suggests the possibility of formulating a South Asia strategy paper. (See related analysis.)

In the economic and social sector, the report outlines a mixed picture of “a giant waking, snapping the cords that bind it and transforming itself into an international powerhouse,” but also soberly underlining that “poverty is still widespread,” with 35% of its huge population living on less than $1 a day and 80% on less than $2. It contrasts the 7-8% economic growth rates and high rates of unemployment, underemployment and vast incomes disparities.

Europe is present and active in both the economic and development fields in India, but the reports recommends enlarging not only the dialogue with India about its role, but also a broader commitment.

Noting that India “has developed an astonishing capacity in new technologies,” and represents 55% of the $19.5 billion IT and software services business being delocalised worldwide, the report remarks that “The EU cannot afford not to engage with this emerging market.” But it quickly underlines that the EU is already engaged with growing investment trade flows. The EU, it notes, is India’s largest trading partner and main source of foreign inward investment. Total EU-India trade has increased from €9.9 billion in 1991 to €28 billion in 2003. But India ranks only as the EU’s 14th trading partner, accounting for only 1.6% of EU exports and imports, behind countries such as China, Brazil and South Africa. India receives only 0.2% of the EU’s FDI outflow; “Volumes of trade and investment are clearly below their true potential,” it suggests. It attributes this to unfinished reforms, tax and duty improvements, intellectual property right protection, non-tariff barriers and governance issues and makes the comment that India was still seen as a difficult place to do business. It also suggests that the EU would be ready to offer assistance in all such areas, “when required by the Government of India.” But it also expresses the opinion that “The Indian economy also needs a complete makeover.” It notes that agriculture still accounts for a nearly a quarter of the Indian economy and its manufacturing sector is less than half the size of China’s.

It recommends an ambitious strategic dialogue on economic issues ranging from competition, finance, the environment, information and communications technologies, biotechnology, transport, energy, space, science and technology and academic exchanges. In many cases, some efforts and projects already exist and in these and others, the report proposes specific development in sectoral dialogues. It adds that the role of business, academia and civil society be incorporated in this process.

In development and assistance, it reports that the EU has foreseen €225 million in grants for India, of which 85% are allocated for poverty reduction. It also notes that much is concentrated on two partnerships in social reform and governance in Rajasthan and Chhattisgarh. It also underlines that the EU, along with the US, Russia, Japan, UK and Germany are the only six bilateral donors active in India since the country reduced the number to more effectively manage projects.

Among other proposals, the paper recommends more contacts between parliamentarian, media, cultural actors and civil society.