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Italy, Europe and India: building a post-covid economy

    • Meeting in digital format
    • 22 July 2020

          The world is in the midst of an unprecedented health and economic crisis, and there seems to be a vacuum in global leadership (certainly of US leadership). No single country can offer an effective recipe for resolution. The EU, at least, has recently demonstrated the ability to come together and agree on a large economic support package, but there remains a need for coordination at an even broader level. This, in turn, may require a consensus on common standards, from fair trade to scientific cooperation to specific health issues.

          Against this general backdrop, the fundamental strategic issue today is the Washington-Beijing confrontation. China is trying to replace the US as the most important power in Asia, and tensions are inevitable. This affects all other powers, including of course India as well as the EU. There is a potential for closer ties between the US and India in the face of Chinese assertiveness, but tensions may also spiral out of control: these are truly dangerous times for Asia and the Indo-Pacific region.

          Europeans are becoming increasingly aware of the impact on themselves of confrontation in Asia. Indeed, they are reviewing the value of a closer partnership with India. An ambitious bilateral trade agreement came to a standstill in 2013, but the political will now seems to be there, to resume talks and make progress. The fact remains, however, that Europe will continue to be preoccupied with its immediate neighborhood of the Middle East and parts of Africa, which certainly call for significant political and economic resources.

          From an Indian perspective, a strategic relationship with the US has been limited by the tactics adopted by the Trump administration, especially the “weaponization” of international trade. Some common ground exists with the EU, however, particularly regarding climate policies – which New Delhi views as an existential issue – and the digital economy. There is significant complementarity in these sectors. For instance, India has a very large solar energy program in place and is interested in diversifying its partners in areas such as electronics and infrastructure.

          Additional business opportunities could emerge if India is willing to open up even more to foreign investments and partnerships; this would also encourage European companies to relocate from China. In truth, only a few European countries have an extensive presence in China, so the shift to India would mostly involve an increase of European investment flows: here (particularly from an Italian perspective) the green economy, energy and infrastructure, advanced manufacturing, the digital sector (including 5G technologies) and the aerospace industry offer the most promising areas of development in the near future. Health care and pharmaceuticals can also be added to this list now: these sectors will rightly attract more attention from now on, as will food processing and agriculture.

          One of the key challenges for closer relations between Indian and Italian companies, in particular, is the need to have whole clusters of firms to come together and cooperate, given the fact that many are small and medium-sized: SMEs have special features that make them nimble but also somewhat vulnerable to the legal framework and the political context. Progress in this respect will also require the active cooperation of governments at various levels.