Trade-wise, India has few levers

India and Italy had been trade partners since the infamous Ottavio Quattrocchi came calling as a representative of the Italian oil giant Eni and its engineering firm Snam Progetti way back in the 1960s.

His entry led to a host of high-profile engineering projects being handed over by state-owned companies like Rashtriya Chemicals and Fertilisers, National Fertilisers and IFFCO to a single company (Snam Progetti) and much controversy thereafter.

However, it failed to sow the seeds of deeper economic dependence between the two countries. At any rate, not of an order that India could use to pressurise the European nation into sending back two of its marines who are under trial for killing Indian fishermen in Indian waters. The current bilateral trade is around $10 billion a year and expected to touch $15 billion by 2015.

“It’s high time we took our bilateral trade to the next level. It’s time for joint ventures and investments,” Ambassador Daniele Mancini had said in Kolkata as recently as March 7.

Italy is currently the fourth biggest trade partner of India in the Euro 27 member zone but its investments stood at a mere 6.2% of the cumulative EU investments into India between 2000 and 2011, said a report by PriceWaterhouse Coopers, a leading consultancy which published a report on trade between the two countries last year.

“Of the total FDI inflow of €36 billion in 2011-2012, Italy accounted for 0.3%, with a net investment of €120 million. As investments from other foreign countries increased, Italy has moved down one position (to 13th, compared to 12th in 2010-11) in the investor ranking for India. Indeed, though there could be some small pressure points that India can use now, it stands to lose more in the long run, said Neelam Deo, former Indian Ambassador to Denmark and Cote d’Ivore and currently director of Gateway House, an Indian Council of Global Relations.

“While the bilateral trade is very small, still is growing fast and India can’t sever ties with Italy economically, considering its massive current account deficit,” she said, though it could use levers such as stopping the dealings of Italian companies with public sector firms temporarily, or stopping payments of contracts to Italian firms for some time.

Sarosh Zaiwalla, senior partner, Zaiwalla & Co Solicitors, a UK-based law firm and a member of the International Maritime Organisation, couldn’t agree more. “India requires FDI and Italy needs to spruce up its investments and this ego trip will not lead to any benefit to the families of the fishermen who were killed,” he said.

According to the Ministry of External Affairs, the main items of Indian exports to Italy are ready-made garments, leather, iron ore, motor vehicles, textiles, chemicals, gems & jewellery. The main items of import from Italy are general and special purpose machinery, machine tools, metallurgical products, and engineering items.

Around 140 large Italian companies are active in India. The major ones to have invested in India are Fiat Auto, Heinz Italia, FIOlA, Italcementi, Necchi Compressori, Perfetti, Lavazza, Fata Hunter Engineering, ENI, SAI India, Isagro (Asia) Agrochemicals, Piaggio, Impreglio, SEA Deutzfahr Group, Finmeccanica and Ferrero.

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