Economy

Modi Heads to Berlin With Open Economy, Merkel Waiting With Open Arms

Though India seems all set to sign a free-trade agreement with the EU, the details will require time and effort to work out.

Prime Minister Narendra Modi. Credit: Reuters/Amit Dave/Files

Prime Minister Narendra Modi. Credit: Reuters/Amit Dave/Files

Berlin: Prime Minister Narendra Modi will meet German Chancellor Angela Merkel here on Tuesday for the bi-annual inter-governmental consultations against the backdrop of expectations that India and Germany want to strengthen framework agreements for trade and investment flows both bilaterally and under the European Union umbrella.

Modi’s visit to Berlin comes days after the G-7 summit in Taormina, Sicily saw heightened strains between the United States and at least four European members of the group, led by Germany, on issues of free trade and climate change. “The times in which we could rely fully on others — they are somewhat over…We have to know that we must fight for our future on our own, for our destiny as Europeans,” German chancellor Angela Merkel said after the summit, underlining for Germany the renewed importance of the EU and other partner nations.

Uncertainty over the direction of the Atlantic alliance is not the only reason Germany is looking at other foreign policy vectors with greater interest.

A new ideological flavour is being lent to Modi’s meeting with Merkel as the German ambassador in New Delhi, Martin Ney, told media persons last week that both Germany and India shared the view that the Chinese Belt Road Initiative (BRI) was not open, democratic and transparent. So there is renewed urgency for India and Germany to work together on new investment and trade agreements. In this context, German officials feel it is important to revive talks on the India-EU Free Trade Agreement (FTA) on goods, services and investment flows.

It appears Modi is also keen to sell India’s renewed thrust on reforms as he is armed with a GST agreement, the strategic partnership framework announced last week for high-tech defence manufacturing and other foreign investment liberalisation measures like abolishing the Foreign Investment Promotion Board and opening up foreign direct investment in the services sector, which was an important demand from both Germany and the EU. This has been one of the big sticking points in the EU-India FTA talks.

So India may unilaterally express its intent to open up these sectors. India may also discuss how new bilateral investment treaties are to be shaped to protect the interests of both India and Germany. The NDA government had cancelled most of the existing bilateral investment agreements on the ground that they did not protect India’s sovereign interests enough and gave foreign companies the benefit of bypassing the Indian judiciary through international arbitration treaties.

It appears India is keen on finding a solution to this problem to enable new investments from Germany.

Germany and other EU governments have so far been unhappy with the “protectionist” stance adopted by India’s commerce ministry. Now, in the backdrop of China’s BRI project, Germany is trying to impress upon India to promote trade and treaties which are more “open, democratic and inclusive”. India seems to be buying the argument in principle, but a lot of detailed “give and take” has to be worked out in the India-EU FTA as well as in the bilateral investment agreements. The devil, as usual, lies in the details – which may take time to resolve.

M.K. Venu is visiting Berlin at the invitation of the German foreign ministry