India-Netherlands Economic and Commercial Relations

The total two-way trade between India and the Netherlands has been over € 500 million since 1990. It crossed the € 1 billion mark in 1997, and rose steadily to € 1520.24 million in 2003. The balance of trade has been in favor of India since 1992, and has gone up to € 448.78 million in 2003. Indian exports to the Netherlands grew from Euro 686.62 million in 1997 to Euro 984.51 million in 2003. Indian imports from the Netherlands also increased from Euro 430.15 million in 1997 to Euro 535.73 million in 2003. 

Despite the stagnation and at times slow growth in the Dutch economy over the past 2-3 years, bilateral trade figures have never slipped, but continued to show definite if modest growth of 8.5% in 2003. Last year, total Indian exports to the Netherlands showed an increase in value terms of 10.65% over 2002. Total Indian imports from the Netherlands during the same year also showed an increase of 4.76% in comparison to 2002. The trend in increased Indian exports to the Netherlands can be attributed mainly to greater acceptance of Indian goods in the local market, resulting in more buyers and an increase in the purchases of existing buyers.

However, given the potential trade prospects between the two countries, India's share of overall Dutch trade continues to be very small. In 2003, Indian exports accounted for only 0.48 % of total Dutch imports, and Dutch exports to India were just 0.23 % of total Dutch exports. 

Major Indian Exports to the Netherlands

Major product groups such as textiles & garments, yarns and fabrics, fruits & vegetables, leather goods, organic chemicals, mineral products, marine products, coffee, tea & spices, autos and auto parts, plastics & plastic products, and transport equipment accounted for 88.73% of India's total exports to the Netherlands during 2003. The share of matrix product groups in the total Indian exports has decreased while the total Indian exports have been increasing, indicating that India's exports to the Netherlands are diversifying into other product groups as well.

Some of the products that showed higher growth rates during 2003 are: fruits & vegetables, mineral products, fats and oils, plastics & plastic products, textiles & garments, yarns and fabrics, machineries, and electrical and electronics items. Apart from the above products, there is potential for further increase in India's exports to the Netherlands in the following products: textiles & garments, especially in the high-end products; electronics & computer software; light engineering products like bicycles, light commercial vehicles, tractors and parts thereof; pharmaceutical products and sports goods.

Major Indian Imports from the Netherlands

During 2003, main products imported by India from the Netherlands were: organic chemicals, pharmaceutical products, plastics & articles, paper and paperboard, iron & steel, copper & articles, aluminium and articles, boilers, machinery & mechanical appliances, electrical machinery equipment; optical, photographic, cinematographic, measuring, medical or surgical instruments and parts thereof. 

Dutch Investments in India

In terms of total investment approvals accorded by the Government of India during the period 1991-2002, the Netherlands was the 6th largest investor in India accounting for a total of Rs 89458.90 million (approximately € 1715 million). The Dutch investments in India started picking up after 1990 when the liberalization process started. The actual growth in investments took place after 1992. Between 1991-97, the Dutch investments in India fluctuated in the double digits, usually less than € 50 million a year. From 1998, the annual investments went into three figures - € 104 million that year, over double that amount, i.e. € 221 million in 1999. There was a slump in 2000 to Euro 54 million, followed by an increase in 2001 to € 143 million and again a drop to € 43 million in 2002. During the year 2002, the Government of India approved a total of 130 proposals between the Dutch and the Indian firms. Out of these, 42 were technical collaborations and 88 were for financial investments.

The Dutch investments in India have mostly been in telecommunications, financial services, petroleum especially oil refining, agro processing, dredging and floriculture. India is now focusing on expanding cooperation with the Netherlands to the star frontier sectors such as information technology and biotechnology. With the liberalization of the rules governing investments abroad by the Indian companies, some of the Indian majors, especially in the IT sector, have started setting up offices in the Netherlands and working to joint ventures. The excellent Dutch port and airport facilities, besides the efficient services sector, are definite incentives in this regard. 

A large number of Dutch majors - Philips, Royal Dutch/Shell, Unilever, the Big Three of Dutch banking - ABN AMRO, ING, and Rabobank - KLM, Akzo Nobel, IHC Holland, SHV, Stork, DHV and others have put down roots in India in important sectors of the economy, and have been steadily planning additional investments to expand their operations in an investor friendly climate.

Today, India has become the prime outsourcing country for the US, UK and other developed countries. It is encouraging that the normally cautious Dutch companies too are also slowly realizing this fact. One of the biggest Dutch IT companies, Pink Roccade, has begun a pilot project with a Bangalore-based company for outsourcing. WIPRO and the Dutch firm Ordina have signed an MOU for cooperation in handling the Benelux energy market and hope to cut the costs by 30-40%. An Anglo-Dutch IT company Logica CMG is going to increase the strength of its Indian outsourcing section from 640 now to 2500 in two years, for an estimated cost advantage at 30-50%.

Interaction between the relevant Dutch authorities, chambers, and companies and their Indian counterparts continues to expand and intensify. Results are evident with some recent positive developments. As a follow-up to Mission's persistent efforts, the Rotterdam Chamber of Commerce has upgraded India to "A" status, which means that they will work with the Mission to promote India to Dutch entrepreneurs in the Greater Rotterdam area. For the first time, the Dutch Ministry of Economic Affairs organised a study visit of a group of 30 young officials working with the Ministry in March 2004 to obtain first-hand information and impression about the Indian economy and its achievements. In the recent past, as many as 5 groups of economics, finance and business management students from six of the top Dutch universities have traveled to India to undertake market research on behalf of the Dutch companies. 

Agreements and Institutional Cooperation

The Netherlands and India have a comprehensive framework of the legal structures necessary for trade and investment promotion, such as a double taxation avoidance agreement (July 1988), and an investment protection agreement (November 1995), which are being updated. Various other agreements, which together constitute a comprehensive framework for economic and commercial co-operation, are operational between India and the Netherlands. These include an Agreement on Economic and Technical Cooperation (February 1983), an MoU on Agriculture (June 1984), an MoU and an Agreement on Scientific Cooperation (July and November 1985 respectively) and an Air Traffic Agreement (May 1951). 

Apart from these, the Federation of Indian Chambers of Commerce & Industry (FICCI) and the Dutch employers' association, VNO-NCW, signed an agreement in February 1982 to promote bilateral trade and economic relations. The Confederation of Indian Industry (CII) and the VNO-NCW also have signed a similar agreement in January 2000. These agreements and MoUs need to be made more effective for further promotion of India-Netherlands economic and trade relations.