Italy’s Economic Ties With India Have Bigger Problems Than The Recent Maritime Scandal

Throughout the tormented saga of the Italian Marines being held in India there has been speculation regarding the potential repercussions there could be against the economic relationship between the two countries. Could there be a cooling on the Indian side towards the Italians, or even retaliatory behaviour from the Italians, now that the Marines have been handed back over to India? The answer will come along the lines of international business practice. There is no doubt that strategic procurement – defense, energy, and infrastructure – are affected by the political climate. The government is the customer and the product is often delivered by public companies. Contracts follow a well-established course and they take time, need to be built up, and of course need good relations, independently of the Indian issue. It is a different case with small and medium enterprise, where business interests move along proven, often repetitive channels. Traditional flows of commerce should not be disrupted, as long as there are no extreme forms of protest, like banning of goods or a consumer boycott. There is more cause for worry about the structure of Italian-Indian commerce. In 2011, India was only the destination for 1% of Italy’s exports, the data confirming the weakness of Italian exports to India. A relative exception is China, 2.7% of Italian exports, but only because China is importing such vast amounts.  In 2012 Italian exports to India fell by 10%, settling at €3.3 billion. For its part, Indian exports make up little more than 1% of Italy’s total import (unsurprisingly mostly chemicals and components), and it is this figure that has shown the steepest decline. In 2012 Indian exports to Italy fell by 21.5%, an evident sign of Italy’s current economic hardships. The number fell to €3.7 billion, keeping a healthy balance between the two countries. India’s exports come in various forms, with petrochemicals, mechanical products, cars and car parts, and consumer goods such as footwear and leather goods at the top of the list. These numbers do not do justice to Italy’s export capacity, India’s economic growth, or the industrial capabilities of both countries; when the wounds of the Italian Marine scandal have healed, the soul-searching ought to consider these aspects. Their roots are decades-old, and as they abide by Italy’s choices (or lack thereof) , it would be unwise to attribute them to recent events.