A Study of Bilateral Economic Relations

Between India and European Union

Thesis submitted to Mahatma Jyotiba Phule Rohilkhand University for
award of the degree of
DOCTOR OF PHILOSOPHY
IN
APPLIED AND REGIONAL ECONOMICS
BY
Sachinder Mohan Sharma
Assistant Professor in Economics
GU (PG) College, Baheri -Bareilly

Under the Supervision of

Dr. M. K. Singh
Associate Professor and Head

Department of
Applied and Regional Economics
M.J.P. Rohilkhand University
Bareilly-243006(UP)

2015

DECLARATION
I declare that the thesis entitled A Study of Bilateral Economic
Relations between India and European Union submitted by me for the
award of the degree of Doctor of Philosophy (Ph.D) of MJP. Rohilkhand
University Bareilly is my own work. The thesis has not been submitted for
any other degree of this University or any other university.

Date:

Name

: Sachinder Mohan Sharma

Signature

DEPARTMENT OF APPLIED AND REGIONAL ECONOMICS

M.J.P ROHILKHAND UNIVERSITY
BAREILLY-243006 (UP)

Certificate
This is to certify that the thesis entitled A Study of Bilateral Economic
Relations between India and European Union submitted to the M.J.P Rohilkhand
University Bareilly, for the award of the degree of Doctor of Philosophy (Ph.D) in
Applied and Regional Economics by Sachinder Mohan Sharma is an original piece
of work done by him under my supervision. He has worked for the period prescribed
under Ph.D ordinance. The thesis is suitable for evaluation for the award of Ph.D
degree.

Date:
Dr. M.K. Singh
Research Guide and Head
DEPARTMENT OF APPLIED AND REGIONAL ECONOMICS
M.J.P ROHILKHAND UNIVERSITY
BAREILLY-243006 (UP)

ACKNOWLEDGEMENT
First and foremost, I would like to express my sincere gratitude to my
supervisor Dr. M.K. Singh Associate Professor and Head Department of Applied and
Regional Economics for the continuous support of my Ph.D study and related
research, for his patience, motivation and immense knowledge. His guidance helped
me in all the time of research and without which this thesis would not have seen the
light of the day, I am extremely grateful to him.
It gives me immense pleasure to thank Dr. Gulshan Sachdeva and Prof. R.K.
Jain of School of International Studies (SIS) of JNU- New Delhi for their insightful
comments and encouragement on all needful aspects relating to the study.
I would also like to thank Mr. Gorakh Chawla Assistant Professor at
Bharathidasan Govt. College for Women, Pondicherry; Vishal Dubey Assistant
Professor in economic at G.B. Pant college, Kachla-Badaun; Dr. R. N. Gangwar M.J.P.
Rohilkhand University, Bareilly; Dr. A. M. Tiwari GU (PG) College Baheri and Mr.
Deepak Sharma Inspector in Indian Postal Department, Muzaffarnagar for their
innumerable favours that I received both in my academic as well as in my personal
life.
I would also like to thank for all comments and suggestions from my other
friends, colleagues and well-wishers at the economics department during the years.
My sincere thanks are also due to librarians and staff of Jawaharlal Nehru
University (JNU), New Delhi; Ratan Tata Library, Delhi School of Economic, New
Delhi; ICSSR library, New Delhi and MJP. Rohilkhand University- Bareilly, for their
generous help in providing me with valuable resources for completing my research
work.
I owe a deep sense of gratitude to my reverend father and mother for their kind
help, blessing and moral support. They have always been a source of inspiration to me
during my entire education and this academic work is really the outcome of their
teaching, guidance, direction and grandeur.

Last but not least I would like to thank my wife Rakhi Sharma who spent
sleepless nights with and was always my support in the moments when there was no
one to support me and to daughter Vidushi and son Sarthak for their love and
affection.

(Sachinder Mohan Sharma)

LIST OF ABBREVIATIONS
ACP-

African, Caribbean and pacific

ACMA
ASE

Automotive Component Manufacturers Association of India

Association of South East Asian Nations

ASSOCHAM-

Association chambers of commerce & industry of India

BIT-

Bilateral Investment Treaties

BOP-

Balance of Payment

CAP-

Common Agricultural Policy

CCA-

Commercial Cooperation Agreement

CECA-

Commercial and Economic Cooperation Agreement

DIPP-

Department Of Industrial Policy

EC-

European Community

EDC

European Defense Community

EDF-

European development Fund

EEC-

European Economic Community

EIB-

European Investment Bank

EOU-

Export oriented Unit

EUROSTAT-

European Community Statistical Office

FDI-

Foreign Direct Investment

FTA-

Free Trade Agreement

FICCI-

Federation of Indian chambers of Commerce& Industry

GATT-

General Agreement on Tariff and Trade

GDP-

Gross Domestic Product

GOI-

Government of India

GSP-

Generalised System Of Preferences

HRD-

Human Resources Development

HSCIBRDICRIER-

Harmonized System Code

International Bank for Reconstruction and Development
Indian Council for Research on International Economic

Relations
IMFIPR-

International Monetary Fund

Intellectual Property Rights

JAP-

Joint Action Plan

MEP

Members of European Parliament

MFA-

Multi Fiber Arrangement

MFN-

Most Favoured Nation

MNC-

Multi National Corporation

NAFTA-

North American Free Trade Agreement

NTB-

Non Tariff Barrier

ODA-

Official Development Assistance

OECD-

Organization for Economic Cooperation and Development

OEEC

Organization For European Economic Cooperation

QRS

Quantitative Restrictions

RBI-

Reserve Bank of India

RCA-

Revealed Comparative Advantage

RTA-

Regional Trade Agreement

SAARC-

South Asian Association for Regional Cooperation

SIAM

Society of Indian Automobile Manufacturers

UK-

United kingdom

UNCTAD-

United Nations Conference on Trade & Development

WIR-

World Investment Report

WITS-

World Integrated Trade Solutions

WTO-

World Trade Organisation

LIST OF TABLES

TABLE NO.

CONTENTS

PAGE NO.

4.1

Indo-EC Trade during (1959-69)

4.2

Indo EC trade 1969-1979

4.4

Indias Export and Import to EU-27 Trade (1996- 2011)

4.5

EUs share in total India trade (%)

4.6

percentage of Indias trade in the EECs total export and import

4.7

Bilateral Merchandise Trade between EU and India

4.8

Indian share in total EU trade (%)

4.9

Indias overall trade with the World and the EU in Millions

4.10

Top trading partners of India- 2012

4.11

Bilateral Services Trade between India and EU

4.12

Per cent Share of Services Trade in Total Trade - India and the

EU
4.13
4.14

FDI flows between EU and India

present Country wise FDI inflow from European Union during 2001-

2012
4.15

FDI Equity Inflows

4.16

Trends of EUs World Imports (Value in million US$.)

4.17

Trend of Indias Export to the European Union (Value in US$ Million)

4.18
4.19
4.20

Indias share in EUs Total Import Country wise (%)

EU-27 Compound Annual Growth Rate of import (CAGR)
Indias Export

to

European

Union

(percentage

Share of

different Product Group)

5.1

Indias Revealed Comparative Advantage in Merchandise Export in

EUs Market (Sector wise)

5.2

EUS Revealed comparative Advantage in Merchandise Export in

Indias Market (Sector wise)

5.3

Indias Revealed Comparative Advantage (at 2 digit) in Merchandise

Export in EUs Market

5.4
5.5
5.6

Indias Top 20 Export commodities to EU-27

RCA and Percentage in Total Export of Top 10 cmmodities export to EU
Top 10 Commodities having highest RCA

LIST OF BOXES
BOX NO.

CONTENTS

PAGENO

EUs share in total India trade (%)

Bilateral Merchandise Trade between EU and India

Indian share in total EU trade (%)

Indias overall trade with the World and the EU in Millions

Top trading partners in import-2012

Top trading partner in export-2012

Top Ten trading partners in total merchandise trade -2012

Bilateral Services Trade between India and EU

FDI flows between EU and India

10

EU-27 Compound Annual Growth Rate of import (CAGR)

ABSTRACT

During the last twenty five years, the process of European economic integration
and economic liberalization in India has created tremendous opportunities for
European Union and India. Trade and economic relations with the European Union
have always been very important for India. Although, in absolute terms, Indias trade
with the EU has increased, but in relative terms it is decreasing. There are several
reasons, due to which India and European Union trade has grown at a slower pace than
Indias total trade.
The European Union is Indias vast market for agricultural goods but the
potentiality does not get fully exploited because of high level of protection in the form
of Non tariff Barriers (NTB). In this context the present study analyses the EUs tariff
and non tariff barriers to Indias export. For this, we have calculated International
Revealed Comparative Advantage (IRCA) for both India and European Union by
using the Balassa index.

Contents

Acknowledgement
List of Abbreviations
List of Tables
List of Boxes
Abstract
Chapter 1-Introduction
Chapter 2-review of literature
Chapter 3-Background Interlinkages of India and European Union
Chapter 4-Analytical frame work of bilateral trade Relations
Chapter 5-Shifting paradigm of Trade Diversions
Chapter 6-Findings and Recommendations
Bibliography
annexure

CHAPTER-I

Introduction

A Study of Bilateral Economic Relations

Between India and European Union
Thesis submitted to Mahatma Jyotiba Phule Rohilkhand University for
award of the degree of

DOCTOR OF PHILOSOPHY
IN
APPLIED AND REGIONAL ECONOMICS
BY
Sachinder Mohan Sharma
Assistant Professor in Economics
GU (PG) College, Baheri -Bareilly

Under the Supervision of

Dr. M. K. Singh
Associate Professor and Head

Department of
Applied and Regional Economics
M.J.P. Rohilkhand University
Bareilly-243006(UP)

2015

DECLARATION

I declare that the thesis entitled A Study of Bilateral Economic

Relations between India and European Union submitted by me for the
award of the degree of Doctor of Philosophy (Ph.D) of MJP. Rohilkhand
University Bareilly is my own work. The thesis has not been submitted for
any other degree of this University or any other university.

Date:

Name
Signature

: Sachinder Mohan Sharma

:

DEPARTMENT OF APPLIED AND REGIONAL ECONOMICS

M.J.P ROHILKHAND UNIVERSITY
BAREILLY-243006 (UP)

Certificate
This is to certify that the thesis entitled A Study of Bilateral Economic
Relations between India and European Union submitted to the M.J.P Rohilkhand
University Bareilly, for the award of the degree of Doctor of Philosophy (Ph.D) in
Applied and Regional Economics by Sachinder Mohan Sharma is an original piece
of work done by him under my supervision. He has worked for the period prescribed
under Ph.D ordinance. The thesis is suitable for evaluation for the award of Ph.D
degree.

Date:
Dr. M.K. Singh
Research Guide and Head
DEPARTMENT OF APPLIED AND REGIONAL ECONOMICS
M.J.P ROHILKHAND UNIVERSITY
BAREILLY-243006 (UP)

ACKNOWLEDGEMENT
First and foremost, I would like to express my sincere gratitude to my
supervisor Dr. M.K. Singh Associate Professor and Head Department of Applied and
Regional Economics for the continuous support of my Ph.D study and related

research, for his patience, motivation and immense knowledge. His guidance helped
me in all the time of research and without which this thesis would not have seen the
light of the day, I am extremely grateful to him.
It gives me immense pleasure to thank Dr. Gulshan Sachdeva and Prof. R.K.
Jain of School of International Studies (SIS) of JNU- New Delhi for their insightful
comments and encouragement on all needful aspects relating to the study.
I would also like to thank Mr. Gorakh Chawla Assistant Professor at
Bharathidasan Govt. College for Women, Pondicherry; Vishal Dubey Assistant
Professor in economic at G.B. Pant college, Kachla-Badaun; Dr. R. N. Gangwar M.J.P.
Rohilkhand University, Bareilly; Dr. A. M. Tiwari GU (PG) College Baheri and Mr.
Deepak Sharma Inspector in Indian Postal Department, Muzaffarnagar for their
innumerable favours that I received both in my academic as well as in my personal
life.
I would also like to thank for all comments and suggestions from my other
friends, colleagues and well-wishers at the economics department during the years.
My sincere thanks are also due to librarians and staff of Jawaharlal Nehru
University (JNU), New Delhi; Ratan Tata Library, Delhi School of Economic, New
Delhi; ICSSR library, New Delhi and MJP. Rohilkhand University- Bareilly, for their
generous help in providing me with valuable resources for completing my research
work.
I owe a deep sense of gratitude to my reverend father and mother for their kind
help, blessing and moral support. They have always been a source of inspiration to me
during my entire education and this academic work is really the outcome of their
teaching, guidance, direction and grandeur.
Last but not least I would like to thank my wife Rakhi Sharma who spent
sleepless nights with and was always my support in the moments when there was no
one to support me and to daughter Vidushi and son Sarthak for their love and
affection.

(Sachinder Mohan Sharma)

LIST OF ABBREVIATIONS
ACPACMA
ASE

African, Caribbean and pacific

Automotive Component Manufacturers Association of India
Association of South East Asian Nations

ASSOCHAM-

Association chambers of commerce & industry of India

BIT-

Bilateral Investment Treaties

BOP-

Balance of Payment

CAP-

Common Agricultural Policy

CCA-

Commercial Cooperation Agreement

CECA-

Commercial and Economic Cooperation Agreement

DIPP-

Department Of Industrial Policy

EC-

European Community

EDC

European Defense Community

EDF-

European development Fund

EEC-

European Economic Community

EIB-

European Investment Bank

EOU-

Export oriented Unit

EUROSTAT-

European Community Statistical Office

FDI-

Foreign Direct Investment

FTA-

Free Trade Agreement

FICCI-

Federation of Indian chambers of Commerce& Industry

GATT-

General Agreement on Tariff and Trade

GDP-

Gross Domestic Product

GOI-

Government of India

GSP-

Generalised System Of Preferences

HRD-

Human Resources Development

HSCIBRDICRIER-

Harmonized System Code

International Bank for Reconstruction and Development
Indian Council for Research on International Economic

Relations
IMFIPR-

International Monetary Fund

Intellectual Property Rights

JAP-

Joint Action Plan

MEP

Members of European Parliament

MFA-

Multi Fiber Arrangement

MFN-

Most Favoured Nation

MNC-

Multi National Corporation

NAFTA-

North American Free Trade Agreement

NTB-

Non Tariff Barrier

ODA-

Official Development Assistance

OECD-

Organization for Economic Cooperation and Development

OEEC

Organization For European Economic Cooperation

QRS

Quantitative Restrictions

RBI-

Reserve Bank of India

RCA-

Revealed Comparative Advantage

RTA-

Regional Trade Agreement

SAARC-

South Asian Association for Regional Cooperation

SIAM

Society of Indian Automobile Manufacturers

UK-

United kingdom

UNCTAD-

United Nations Conference on Trade & Development

WIR-

World Investment Report

WITS-

World Integrated Trade Solutions

WTO-

World Trade Organisation

LIST OF TABLES
TABLE NO.
4.1

CONTENTS

Indo-EC Trade during (1959-69)

PAGE NO.

4.2

Indo EC trade 1969-1979

4.4

Indias Export and Import to EU-27 Trade (1996- 2011)

4.5

EUs share in total India trade (%)

4.6

percentage of Indias trade in the EECs total export and import

4.7

Bilateral Merchandise Trade between EU and India

4.8

Indian share in total EU trade (%)

4.9

Indias overall trade with the World and the EU in Millions

4.10

Top trading partners of India- 2012

4.11

Bilateral Services Trade between India and EU

4.12

Per cent Share of Services Trade in Total Trade - India and the

EU
4.13
4.14

FDI flows between EU and India

present Country wise FDI inflow from European Union during 2001-

2012
4.15

FDI Equity Inflows

4.16

Trends of EUs World Imports (Value in million US$.)

4.17

Trend of Indias Export to the European Union (Value in US$ Million)

4.18

Indias share in EUs Total Import Country wise (%)

4.19

EU-27 Compound Annual Growth Rate of import (CAGR)

4.20

Indias Export

to

European

Union

(percentage

Share of

different Product Group)

5.1

Indias Revealed Comparative Advantage in Merchandise Export in

EUs Market (Sector wise)

5.2

EUS Revealed comparative Advantage in Merchandise Export in

Indias Market (Sector wise)

5.3

Indias Revealed Comparative Advantage (at 2 digit) in Merchandise

Export in EUs Market

5.4
5.5
5.6

Indias Top 20 Export commodities to EU-27

RCA and Percentage in Total Export of Top 10 cmmodities export to EU
Top 10 Commodities having highest RCA

LIST OF BOXES
BOX NO.
1

CONTENTS

EUs share in total India trade (%)

PAGENO

Bilateral Merchandise Trade between EU and India

Indian share in total EU trade (%)

Indias overall trade with the World and the EU in Millions

Top trading partners in import-2012

Top trading partner in export-2012

Top Ten trading partners in total merchandise trade -2012

Bilateral Services Trade between India and EU

FDI flows between EU and India

10

EU-27 Compound Annual Growth Rate of import (CAGR)

ABSTRACT

During the last twenty five years, the process of European economic integration
and economic liberalization in India has created tremendous opportunities for
European Union and India. Trade and economic relations with the European Union
have always been very important for India. Although, in absolute terms, Indias trade
with the EU has increased, but in relative terms it is decreasing. There are several
reasons, due to which India and European Union trade has grown at a slower pace than
Indias total trade.
The European Union is Indias vast market for agricultural goods but the
potentiality does not get fully exploited because of high level of protection in the form
of Non tariff Barriers (NTB). In this context the present study analyses the EUs tariff
and non tariff barriers to Indias export. For this, we have calculated International
Revealed Comparative Advantage (IRCA) for both India and European Union by
using the Balassa index.

Contents
Acknowledgement

List of Abbreviations
List of Tables
List of Boxes
Abstract
Chapter 1-Introduction
Chapter 2-review of literature
Chapter 3-Background Interlinkages of India and European Union
Chapter 4-Analytical frame work of bilateral trade Relations
Chapter 5-Shifting paradigm of Trade Diversions
Chapter 6-Findings and Recommendations
Bibliography
annexure

CHAPTER-I

Introduction