Spain-India, the missing trade conundrumIt is a source of considerable frustration that Spain as the ninth and India as the 11th biggest economies do not have bilateral trade that matches the size of their respective economies.
External trade between the two economic powers is a paltry US$ 3.12 billion in 2009-2010 or less than 1 percent of the total international trade conducted by India. What gives? Historical, cultural, language and geopolitical reasons have been cited in the past for the low trade performance.
Spanish companies have looked to Latin America as the logical extension of their external market penetration strategy. Language and history have stood in the way. This argument is tenuous in the era of globalization. After all, Spain China external trade is over five times that of Spain-India reaching 16 billion euros.
The perception of India as a trading partner is only now beginning to change as Spain seeks to diversify globally from its own internal construction and tourism over dependence.
The visit of the Principe of Asturias to India and the return visit by the President of India to Spain helped to accelerate the tone of business relationships between the two countries. For Spain, the role of international trade and business development with emerging economies such as that of India is clear in its quest to get out of the economic maelstrom.
Indeed, international trade is now the main mantra of Spanish policy makers. Spain is much more than housing and tourism though. The 2010 world cup soccer champions have cutting edge technology in the areas of infrastructure, high speed trains, alternative energy, food processing and tourism. All of these are considered priority areas by the Indian side. India in turn is a recognized provider of generic pharmaceuticals, information and biotechnology, automotive equipment and industrial equipment. These areas are of interest to Spanish companies. There are other economic plays as well.
India offers a potentially lucrative landscape to Spanish fashion merchandisers, consumer goods producers and financial institutions alike. An Indian middle class that rivals the population of Europe is obviously the key attraction. While Spain holds an allure as a platform for Indian companies as a door to Europe and possibly Latin America and North Africa.
In this context, the Gujarat business delegation visit to Spain took on a special relevance. Organized by Price Waterhouse, Embassy of India in Spain, The Confederation of Empresarios de España, Europe India Chamber of Commerce and led by Mr. Mohapatra of Gujarat Alkalies and Chemicals Ltd., the main objective of the visit was to showcase Gujarat as a pro-business platform for Spanish companies looking to seek an entrée into India. The delegation drew several Spanish companies to Madrid with 17 from the Valencia Region.
Gujarat is known for attracting reputed Indian business houses in investing and developing megaprojects in the state. Tata Nano decided to pull out of West Bengal to establish its manufacturing plant in Sanand, Gujarat to produce the first under US$ 2500 car. The decision was helped by the business friendly policies of the Gujarat government with a fast track approval process.
“Anecdotally we can say that the Gujarat government took the decision to allow the Nano plant in a day,” stated Mohapatra. This is an important consideration for Spanish businesses in a country like India which has a reputation of snarling up projects for bureaucratic and political reasons. The Nano manufacturing location was chosen because of the close proximity to ports like Rajkot and Mundra a key infrastructural element.
The Nano supply chain depends on the efficient transportation of parts and components through sea-lanes. Gujarat had other impressive statistics to present: with a 5 percent share of Indian population, Gujarat contributes 21 percent in exports and 13 percent in India’s industrial production a fact that served to enhance its reputation amongst Spanish companies assembled for the delegation visit.
It was an eye-opener for Orlando Iglesias Marketing Director of Traffic Futura, a company from Valencia specializing in traffic systems needed for modernizing Indian highway infrastructure. “We are bidding for a highway project in India and from what we have heard Gujarat seems like an extremely interesting base of operations for us.”
India is terra incognita to most Spanish companies. Therefore, the appeal of a Gujarat state based land bank was not lost to Spanish companies looking to establish solar farms in India. “We know land is a big issue in India and if the government can step in to provide it on attractive terms then it is interesting for us”, remarked another participant, Isolux, a market leader in solar panels and solar farm installations. Foreign companies apparently are loathe to repeat the experience that Tata went through with its Nano project initially.
The Europe India Chamber of Commerce in Spain brought together several Spanish companies particularly from the Valencia Region to the meetings with the Gujarat delegation. Clearly there is a palpable interest to work together and several commercial and joint venture possibilities were discussed in food processing, infrastructure and alternative energy sectors.
To give the visit a sustainable momentum the Europe India Chamber of Commerce in Spain undertook to organize a mission to the Vibrant Gujarat Summit in January of 2011. This summit has attracted many international participants in the past but few companies have been from Spain.
Clearly much needs to be done to fill in the missing bilateral trade numbers. There is a sizable scope for growth in India Spain trade and steps are already being taken by export promotional agencies on both sides. Instituto Español de Comercio Exterior popularly known as ICEX has launched an initiative to attract Spanish companies from the food processing sector to India.
In the end it will have to be the private sector that will need to address the missing trade numbers between the economic powers. An anomaly exists and entrepreneurial minds and free enterprise from both sides will inevitably fill in the gap in the time to come.
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September 27, 2010
Spain-India, the missing trade conundrum
It is a source of considerable frustration that Spain as the ninth and India as the 11th biggest economies do not have bilateral trade that matches the size of their respective economies. More
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