What Brexit Means for India: Renewed Relations with Europe?

 Brexit, the withdrawal of the United Kingdom from the European Union, has reshuffled the deck in terms of relations between India and European countries. India might benefit from this break-up by enhancing ties with both parties. The UK and the EU are losing trading partners in the process, so they will both be looking for replacements, and India looks like a promising contender. Europeans have acknowledged India’s economic rise and are now seeking to take advantage of it. Being courted by both parties, India is in an advantageous position to strike a favourable deal. 

By leaving the EU, the UK risked a slump in its foreign trade and economic growth. To countervail it, Britain is looking for renewed relations with India. After Indian independence in 1947, India and the UK managed to sustain a relatively good diplomatic relationship, and their economic ties remained strong. The UK is the third largest investor in India and a major trading partner. A large Indian diaspora living in Britain also helps sustain bonds between the two countries.

Former PM David Cameron had recently used the discourse of special relationship to reinforce economic ties between the two countries. His successor Theresa May has been keen on following this path. Her first visit out of the EU after the Brexit referendum was symbolic; she went to India to signify who would be Britain’s next main trading partner. A free trade agreement was on the negotiation table, yet most of the talks were monopolized by the visa issue. The British government has been reluctant to ease up on the visa regime for Indian students and workers. Her opponent in the next General Election, Labour Party leader Jeremy Corbyn, has criticized May’s approach. He called for a fairer partnership between the two countries and talked in favour of Indian immigration. If he wins the upcoming elections, a deal may be easier to reach. But the free trade agreement is also hampered by the Brexit process. Nothing can legally be achieved until the UK formally leaves the EU, which will not happen before two years. By then, India might have struck a deal with a bigger partner. 

Last May, Indian Prime Minister Narendra Modi went on a European tour and visited Germany, the steering wheel of the EU, and India’s most prolific trading partner. The EU and India established a strategic partnership in 2004, setting a broad cooperation from trade to security matters. Negotiations were launched in 2007 to include the Broad-based Investment and Trade Agreement (BITA), but faced a stalemate. After Brexit released the EU from Britain’s various restraints, Germany Chancellor Angela Merkel has been eager to reactivate the talks. Both parties should win from a comprehensive free trade agreement replacing bilateral deals and their cumbersome negotiations.

Germany and India could both benefit from the BITA, since it would enhance their economic relations. Worried about the post-Brexit British economic slowdown, India is seeking to diversify its trade and investment partners, while Germany is looking for replacing Britain as India’s primary European investment partner, in addition to already holding the status of India’s number one trading partner.

After Germany, PM Modi visited France. Even if Modi has praised French President Emmanuel Macron’s election for the pro-European stance it represented, their meeting focused more on the strategic bilateral ties of the two countries. The main subjects, terrorism and climate change, emphasized recent events, but Indian-French relations have much deeper substance.

France and India carried out diplomatic relations throughout the Cold War, with both countries supporting each other’s foreign policy of strategic autonomy. France did not condemn India’s nuclear weapon test in 1998 and a strategic partnership started that year. Since then, they have cooperated in the fields of defence, space, energy, railways, and urban development. Several projects epitomize this cooperation. France and India are conducting the Jaitapur Nuclear Power Project to build six new nuclear plants in Maharashtra. They have worked together to launch the International Solar Alliance initiative set by PM Modi in 2015, and in 2016, France sold 36 Rafales fighter aircrafts to India as part of a weapon package deal crucial for the modernization of the Indian military.  The two countries also carried out joint military exercises, both having interests at stake in the Indian Ocean, and being wary of China’s growing presence in the region. Macron is likely to continue and increase the cooperation with India, whether or not the BITA is reached.

European countries are competing to benefit from the windfall of India’s economic rise. If the UK seems in an unfavourable position to set a free trade agreement, the country can still play the card of old historical and cultural bonds, while the EU, Germany and France only rely on politically driven, government-to-government ties. The lack of people-to-people links (a poll conducted by the BBC in 2014 showed that only 40 percent of the French public and 16 percent of the German public had a positive view of India) and small and medium enterprises’ involvement could lead to trade stagnation and frustrate a sustainable relationship in the long run.