The Hindu Business Line : Italian connections

IT IS WELCOME that India and Italy have set a bilateral trade target of 5 billion euros, to be attained in two years, as there exists considerable scope to step up the economic ties which are now worth 3 billion euros. Worked on appropriately, there could be a more mature and sustained economic relationship between the two nations. While these plus points emerged from the Italian President, Mr Carlo Azgelio Ciampi's recent visit to India, it must be remembered that, on the ground, not much headway has been made in bilateral trade despite the existence of an institutional framework to bolster that exchange.

An Indo-Italian Joint Commission for Economic Cooperation has been in place since 1976 but did precious little to step up the bilateral trade exchange through the 1980s and the early 1990s. Only in 1996, at the 12th session of the Joint Commission, did interest perk up to the extent of setting up Joint Working Groups for tourism and food-processing, one on information technology following in 1998. Historically, the level of interest in both the countries to expand and deepen trade contacts has been low with the result that in 2002 India accounted for just 0.6 per cent of total Italian global imports and 0.4 per cent of exports, the corresponding Italian share being 1.32 per cent and 2.57 per cent. From the Indian perspective, the only silver lining has been the trade surplus it has been enjoying since the late 1980s; in 2003-04, it was as much as 23 per cent of the total trade turnover.

It is against this backdrop that the current interest in increasing mutual trade should be seen, the reason perhaps being the increasing attention the Indian economy has been receiving on the international stage. This was highlighted by Mr Ciampi himself when he said that Italian investors would do well to penetrate and exploit the opportunities provided by emerging markets such as India and China not the least because of the "exchange rate and low-cost manpower". Obviously, the information technology sector has become the bait for Italian investors, with Mr Ciampi going out of his way to highlight the fact that an Indian IT engineer costs "one-fourth as much as a European engineer".

It may be a good opportunity to milk the IT cow once again. But for New Delhi there are other important areas, particularly in view of the national requirement (as pointed out by the Commerce and Industry Minister, Mr Kamal Nath) of $150 billion in foreign direct investment over the next few years. The transportation sector accounts for more than half the Italian FDI, followed by food-processing, metallurgy, electrical equipment (including computer software) and textiles. But here too the base is low, with Italy accounting for just 2.04 per cent of total FDI approvals from January 1991 to December 2002. Clearly, there is potential to increase Indo-Italian trade and investment contacts but India would have to face up to the stringent EU stipulations, especially such non-tariff barriers as the inordinately restrictive sanitary and phyto-sanitary standards.

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