A Study of Bilateral Economic Relations Between India and European UnionThesis submitted to Mahatma Jyotiba Phule Rohilkhand University for award of the degree of DOCTOR OF PHILOSOPHYIN APPLIED AND REGIONAL ECONOMICSBYSachinder Mohan SharmaAssistant Professor in EconomicsGU (PG) College, Baheri -BareillyUnder the Supervision of Dr. M. K. Singh Associate Professor and Head

Department of Applied and Regional EconomicsM.J.P. Rohilkhand UniversityBareilly-243006(UP)2015

DECLARATIONI 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 SharmaSignature :

DEPARTMENT OF APPLIED AND REGIONAL ECONOMICSM.J.P ROHILKHAND UNIVERSITY BAREILLY-243006 (UP)

CertificateThis 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)

ACKNOWLEDGEMENTFirst 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 ABBREVIATIONSACP-African, Caribbean and pacificACMA Automotive Component Manufacturers Association of India ASE Association of South East Asian NationsASSOCHAM- Association chambers of commerce & industry of IndiaBIT- Bilateral Investment TreatiesBOP- Balance of PaymentCAP- Common Agricultural PolicyCCA- Commercial Cooperation AgreementCECA- Commercial and Economic Cooperation AgreementDIPP- Department Of Industrial PolicyEC- European Community EDC European Defense Community EDF- European development FundEEC- European Economic CommunityEIB- European Investment BankEOU- Export oriented UnitEUROSTAT- European Community Statistical OfficeFDI- Foreign Direct InvestmentFTA- Free Trade AgreementFICCI- Federation of Indian chambers of Commerce& IndustryGATT- General Agreement on Tariff and TradeGDP- Gross Domestic ProductGOI- Government of IndiaGSP- Generalised System Of PreferencesHRD- Human Resources DevelopmentHSC- Harmonized System CodeIBRD- International Bank for Reconstruction and DevelopmentICRIER- Indian Council for Research on International Economic RelationsIMF- International Monetary FundIPR- Intellectual Property Rights JAP- Joint Action Plan MEP Members of European Parliament MFA- Multi Fiber ArrangementMFN- Most Favoured NationMNC- Multi National CorporationNAFTA- North American Free Trade AgreementNTB- Non Tariff BarrierODA- Official Development AssistanceOECD- Organization for Economic Cooperation and Development OEEC Organization For European Economic CooperationQRS Quantitative RestrictionsRBI- Reserve Bank of IndiaRCA- Revealed Comparative Advantage RTA- Regional Trade Agreement SAARC- South Asian Association for Regional CooperationSIAM Society of Indian Automobile ManufacturersUK- United kingdomUNCTAD- United Nations Conference on Trade & DevelopmentWIR- World Investment ReportWITS- World Integrated Trade SolutionsWTO- World Trade Organisation

LIST OF TABLESTABLE NO. CONTENTS PAGE NO. 4.1 Indo-EC Trade during (1959-69)4.2 Indo EC trade 1969-19794.4 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 India4.8 Indian share in total EU trade (%)4.9 Indias overall trade with the World and the EU in Millions4.10 Top trading partners of India- 20124.11 Bilateral Services Trade between India and EU4.12 Per cent Share of Services Trade in Total Trade - India and the EU 4.13 FDI flows between EU and India4.14 present Country wise FDI inflow from European Union during 2001-20124.15 FDI Equity Inflows4.16 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 Indias Top 20 Export commodities to EU-275.5 RCA and Percentage in Total Export of Top 10 cmmodities export to EU 5.6 Top 10 Commodities having highest RCA

LIST OF BOXESBOX NO. CONTENTSPAGENO1 EUs share in total India trade (%)2 Bilateral Merchandise Trade between EU and India3 Indian share in total EU trade (%)4 Indias overall trade with the World and the EU in Millions5 Top trading partners in import-20126 Top trading partner in export-20127 Top Ten trading partners in total merchandise trade -20128 Bilateral Services Trade between India and EU9 FDI flows between EU and India10 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.

ContentsAcknowledgementList of AbbreviationsList of TablesList of BoxesAbstractChapter 1-IntroductionChapter 2-review of literatureChapter 3-Background Interlinkages of India and European UnionChapter 4-Analytical frame work of bilateral trade RelationsChapter 5-Shifting paradigm of Trade DiversionsChapter 6-Findings and RecommendationsBibliographyannexure

CHAPTER-IIntroduction

A Study of Bilateral Economic Relations Between India and European UnionThesis submitted to Mahatma Jyotiba Phule Rohilkhand University for award of the degree of DOCTOR OF PHILOSOPHYIN APPLIED AND REGIONAL ECONOMICSBYSachinder Mohan SharmaAssistant Professor in EconomicsGU (PG) College, Baheri -BareillyUnder the Supervision of Dr. M. K. Singh Associate Professor and Head

Department of Applied and Regional EconomicsM.J.P. Rohilkhand UniversityBareilly-243006(UP)2015

DECLARATIONI 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 SharmaSignature :

DEPARTMENT OF APPLIED AND REGIONAL ECONOMICSM.J.P ROHILKHAND UNIVERSITY BAREILLY-243006 (UP)

CertificateThis 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)

ACKNOWLEDGEMENTFirst 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 ABBREVIATIONSACP-African, Caribbean and pacificACMA Automotive Component Manufacturers Association of India ASE Association of South East Asian NationsASSOCHAM- Association chambers of commerce & industry of IndiaBIT- Bilateral Investment TreatiesBOP- Balance of PaymentCAP- Common Agricultural PolicyCCA- Commercial Cooperation AgreementCECA- Commercial and Economic Cooperation AgreementDIPP- Department Of Industrial PolicyEC- European Community EDC European Defense Community EDF- European development FundEEC- European Economic CommunityEIB- European Investment BankEOU- Export oriented UnitEUROSTAT- European Community Statistical OfficeFDI- Foreign Direct InvestmentFTA- Free Trade AgreementFICCI- Federation of Indian chambers of Commerce& IndustryGATT- General Agreement on Tariff and TradeGDP- Gross Domestic ProductGOI- Government of IndiaGSP- Generalised System Of PreferencesHRD- Human Resources DevelopmentHSC- Harmonized System CodeIBRD- International Bank for Reconstruction and DevelopmentICRIER- Indian Council for Research on International Economic RelationsIMF- International Monetary FundIPR- Intellectual Property Rights JAP- Joint Action Plan MEP Members of European Parliament MFA- Multi Fiber ArrangementMFN- Most Favoured NationMNC- Multi National CorporationNAFTA- North American Free Trade AgreementNTB- Non Tariff BarrierODA- Official Development AssistanceOECD- Organization for Economic Cooperation and Development OEEC Organization For European Economic CooperationQRS Quantitative RestrictionsRBI- Reserve Bank of IndiaRCA- Revealed Comparative Advantage RTA- Regional Trade Agreement SAARC- South Asian Association for Regional CooperationSIAM Society of Indian Automobile ManufacturersUK- United kingdomUNCTAD- United Nations Conference on Trade & DevelopmentWIR- World Investment ReportWITS- World Integrated Trade SolutionsWTO- World Trade Organisation

LIST OF TABLESTABLE NO. CONTENTS PAGE NO. 4.1 Indo-EC Trade during (1959-69)4.2 Indo EC trade 1969-19794.4 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 India4.8 Indian share in total EU trade (%)4.9 Indias overall trade with the World and the EU in Millions4.10 Top trading partners of India- 20124.11 Bilateral Services Trade between India and EU4.12 Per cent Share of Services Trade in Total Trade - India and the EU 4.13 FDI flows between EU and India4.14 present Country wise FDI inflow from European Union during 2001-20124.15 FDI Equity Inflows4.16 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 Indias Top 20 Export commodities to EU-275.5 RCA and Percentage in Total Export of Top 10 cmmodities export to EU 5.6 Top 10 Commodities having highest RCA

LIST OF BOXESBOX NO. CONTENTSPAGENO1 EUs share in total India trade (%)2 Bilateral Merchandise Trade between EU and India3 Indian share in total EU trade (%)4 Indias overall trade with the World and the EU in Millions5 Top trading partners in import-20126 Top trading partner in export-20127 Top Ten trading partners in total merchandise trade -20128 Bilateral Services Trade between India and EU9 FDI flows between EU and India10 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.

ContentsAcknowledgementList of AbbreviationsList of TablesList of BoxesAbstractChapter 1-IntroductionChapter 2-review of literatureChapter 3-Background Interlinkages of India and European UnionChapter 4-Analytical frame work of bilateral trade RelationsChapter 5-Shifting paradigm of Trade DiversionsChapter 6-Findings and RecommendationsBibliographyannexure

CHAPTER-IIntroduction