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​PM’s bid to sweep through Europe is not just for Bilateral trade​

Prime Minister Narenda Modi is sweeping through Europe’s major cities, as he visits Germany, Spain, Russia and France. The trip is billed as giving a boost to bilateral relations across a wide array of issues including security, terrorism, business, energy and climate change,  

However, the true purpose of this gruelling schedule actually owes more to Indian domestic problems more than such macro global challenges: Modi needs to secure deals for his country with his western counterparts to revive his country’s fortunes. And time is running out for the Indian Prime Minister. Elected on his promises to re-structure the Indian economy, bolster development by creating jobs, build much-needed infrastructure and bring power to the tens of thousands of remote villages without a stable supply, his tenure has been unimpressive so far.

Indeed, after three years in power, Labour Bureau data shows that employment is actually at the lowest levels for three years, with 63% of Indians feeling that unemployment is not declining and Chief Economic Adviser Arvind Subramaniam conceding that the information technology, construction and agricultural sectors  – all once great job creators in the Indian economy  – are underperforming. And that’s all before you consider the thorny issue of demonetization, which sent the Indian economy in a tailspin, with yearly GDP growth declining to 6.1%, the lowest in two years.

Another area where Modi needs some external help is electrification, widely seen as the biggest problem holding back the country’s development. While the Bharatiya Janata Party (BJP) claims to have electrified 73% of the 18,400 villages lacking access, only 8% have actually had all of their households electrified. In many cases, having a functioning street lamp is enough for the government to mark a town as “electrified”. The reason for this accounting trick stems from the magnitude of the challenge: some 300 million people are still in the dark, and bringing them onto the grid will require billions.

Indian Energy Minister Piyush Goyal has been spearheading the country’s electrification effort, by building solar panels and upgrading coal power plants. In a recent interview with the Financial Times, he pointed out: “I cannot tell [the Indian people]: British people have benefitted from coal-based power for 200 years and spewed all that carbon up there and now India must pay three times the cost.” Indeed, completely eschewing fossil fuels is not only impractical but also potentially less impactful than trying to improve the way in which the country uses this type of energy. Upgrading 25-year-old plants to modern super-critical plants is likely to bring down pollution levels more than the “thrust that has been given to renewable energy”, he said, explaining: “40GW of such plants will generate “saving[s] [that] will be far greater than possibly the 100,000 MW of solar power that we will be generating.”

It is against this backdrop – of a subdued economy and major projects that need financing  –that Modi no doubt planned his European voyage. In particular, the prime minister is pushing for a free trade deal with the EU: slashing both tariffs and non-tariff barriers would have the potential to increase imports from India to the EU by 87%. The deal had long been blocked by the UK, which could not agree on easing visa restrictions for high-skilled Indian workers and the high tariffs practiced by India on foreign wines and spirits.

Even so, negotiating a trade deal will take years. In the meantime Modi will try to rekindle India’s trade relationship with other major European countries. Germany, for example, used to be a top trade partner – however, total exchanges between the two have lessened in the last six years. From a high $23.5 billion in 2011-12, the bilateral relationship declined to $18.73 bn in 2016-17. Is it any wonder then, that in his inaugural address in the Indo-German Business Summit in Berlin, Modi asserted that economic cooperation between the two countries was currently below “its full potential” and that “we in India are waiting with open arms because we value German partnership a lot.”

And Germany isn’t the only country Modi is making overtures to. In Russia, Modi will be the guest of honour at the Saint Petersburg Economic Forum (SPIEF), where multibillion dollar deals are expected to be signed, amongst them, an agreement for Russian credit to finance building Units 5 and 6 of the Kundankulam nuclear power plant in Tamil Nadu.

In all these visits, Modi is sending out a clear message to his European counterparts: India is open for business, and especially open for investment. To this end, he has landed on European soil armed with a legislative and administrative armoury designed to grease the wheels of commerce, such as the passage of the goods and services tax (GST) bill and abolishment of the Foreign Investment Promotion Board, the panel responsible for approving foreign investment proposals in India.

Certainly, now is a good time for India to open its shop window to the world. Donald Trump’s election has raised doubts about the future EU-US relation, leading European leaders to look elsewhere for more reliable allies. Modi, undoubtedly, is hoping to capitalise on this context to ensure that in the near future, his country will be the partner of choice.