India and Poland Upgrade Bilateral Relations to ‘Strategic Partnership’

In a key milestone for India and Poland, the two nations elevated their bilateral relations to a ‘Strategic Partnership’ during Indian Prime Minister Narendra Modi’s maiden visit to Poland on August 21 and 22. The official visit also marked the first time an Indian Prime Minister had traveled to Poland in 45 years. India and Poland are also observing the 70th anniversary of the establishment of diplomatic relations this year.

India’s Prime Minister Narendra Modi’s latest visit to Poland showcases India’s intention to expand its ties to Europe beyond Western states. Following the latest round of discussion between Modi and Polish Prime Minister Donald Tusk in Warsaw, the two countries agreed to a five-year Action Plan (2024-2028) to enhance cooperation in various areas.

Their talks also included a landmark agreement on social security aimed at enhancing the movement of skilled workers. Additionally, both Modi and Tusk expressed a strong commitment to significantly expanding bilateral defense and security collaboration, with Tusk emphasizing Poland’s desire to play a key role in India’s efforts to boost domestic defense production and modernize its military forces.

India-Poland Strategic Partnership: Action Plan (2024-2028)

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Building on the consensus reached by the Prime Ministers of India and Poland during their talks on August 22, 2024, in Warsaw, and recognizing the momentum generated by the establishment of the Strategic Partnership, both sides agreed to develop and implement a five-year Action Plan. This plan will guide bilateral collaboration from 2024 to 2028, focusing on the following priority areas:

Political dialogue and security

• Regular meetings between foreign ministers will be maintained, both bilaterally and in international forums.
• Both countries will support each other’s goals in multilateral cooperation based on the UN Charter.
• Annual political dialogue will be held at the deputy foreign minister level.
• The countries will hold regular consultations on security and defense, focusing on modernizing military equipment and defense industry connections. The next defense cooperation meeting is planned for 2024.

Trade and investment

• Cooperation will expand in sectors such as high-tech, agriculture, energy, and defense during the upcoming Joint Economic Cooperation meeting at the end of 2024.
• Meetings will be held at least twice every five years to enhance trade and investment while ensuring balanced trade and addressing economic security risks.

Climate, energy, mining, and technology

• Both countries will collaborate on sustainable technologies, including cleaner energy and waste management.
• Joint efforts will focus on advancing cleaner energy, clean coal technologies, and innovation in mining.
• Both nations hope to establish agreements on space exploration, including the safe use of space and cooperation in space ecosystems.

Transport and connectivity

• Both sides will work on enhancing transport infrastructure and expanding flight connections.

India-European Union (EU) relations

• Both countries shall support the early conclusion of the India-EU trade and investment negotiations, the operationalization of the India-EU Trade and Technology Council (TTC), and the implementation of the India-EU Connectivity Partnership to advance the India-EU Strategic Partnership in trade, new technologies, and security.

Way forward

• The implementation of the Action Plan will be reviewed annually, with the possibility of extending the plan for another five years.

India extends business surety to Poland

Prime Minister Modi also met with Gawel Lopinski, CEO of Billenium Pvt. Ltd., a prominent Polish IT company with a strong base in Pune, in the western state of Maharashtra. During their discussion, Modi inquired about Billenium’s expansion plans in India and raise possible opportunities for India-Poland collaboration in emerging technologies, artificial intelligence (AI), cybersecurity, and the digital economy.

In a separate meeting, Modi met with Alina Posluszny, Managing Director of TZMO India, a leading Polish manufacturer of hygiene products.

Scope for cooperation in manufacturing defense equipment and military modernization

The scope for defense cooperation between India and Poland is promising, particularly as Warsaw is reportedly undertaking its largest defense modernization effort, replacing outdated equipment with NATO-standard weapons.

This dynamic presents a mutually beneficial opportunity for both nations to collaborate on defense upgrades. The WB Group, Poland’s largest private defense company, already active in India through WB India, offers advanced military systems and electronics.

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With India’s Ministry of Defense establishing defense industrial corridors in Uttar Pradesh and Tamil Nadu, WB India is well-positioned to collaborate with private Indian companies in co-designing, co-developing, and co-producing cutting-edge defense equipment, including drone platforms and cybersecurity systems.

Although the agreed 5-year Action Plan of the two countries includes various areas of cooperation, defense collaboration is likely to remain central. India and Poland have had long-standing cooperation on a specific model of Armoured Recovery Vehicles (ARVs) known as the WZT-3. This vehicle has been co-produced by Poland’s Bumar and India’s BEML, both of which have been instrumental in supporting the T-72 Main Battle Tank.

For some time, both nations have been considering upgrading the WZT-3 to the WZT-3M. In 2023, India issued a new Request for Information (RFI) for ARVs, with Bumar being a key contender due to its extensive experience with India. The recently established strategic partnership and its five-year action plan could help advance the Bumar deal.

Key bilateral agreements signed between India and Poland

A series of agreements have been established between the Government of Poland and the Government of India, covering various areas of cooperation:

• January 25, 1977: Agreement on air transport and an agreement on economic, industrial, and technical cooperation.
• June 21, 1989: Agreement to avoid double taxation and prevent tax evasion on income.
• January 12, 1993: Science and technology cooperation agreement.
• October 7, 1996: Investment promotion and protection agreement.
• March 17, 2003: Defense cooperation agreement.
• May 19, 2005: Economic cooperation agreement.
• September 24, 2009: Agreement on tourism cooperation.
• 2012: Agreement on audio-visual co-production.
• 2013: Protocol amending the agreement on the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.
• 2015: Agreement on exemption from visa requirements for holders of diplomatic passports.
• 2017: Agreement on cooperation in agriculture and allied sectors.
• 2019: Agreement on cooperation in coal mining.
• 2022: Mutual Legal Assistance Treaty in Criminal Matters and Agreement on engagement in gainful occupation by family members of members of diplomatic missions or consular posts.

Double tax treaty

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Poland and India have both ratified the MLI, which alters the method of avoiding double taxation to the tax credit method. Consequently, the application of the double tax treaty between the two countries was revised.

    For Poland:

• For taxes withheld at source on amounts paid or credited to non-residents, the MLI provisions apply to events occurring on or after January 1, 2020.
• For all other taxes levied by Poland, the MLI provisions apply to taxable periods beginning on or after April 1, 2020.

    For India:

• For taxes withheld at source on amounts paid or credited to non-residents, the MLI provisions apply to events occurring on or after the first day of the next taxable period beginning on or after October 1, 2019.
• For all other taxes levied by India, the MLI provisions apply to taxable periods beginning on or after April 1, 2020.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI) is an OECD initiative aimed at combating tax avoidance by multinational enterprises. It was developed under the OECD G20 BEPS project and allows countries to quickly amend their bilateral tax treaties to implement agreed-upon anti-BEPS measures.

To know more about India’s double tax treaty regime, read our article here.

Economic relations between India and Poland

Trade

India-Poland trade relations have progressed over the years. Between 2010 and 2022, trade in goods between the two countries increased fivefold. However, this surge mainly benefited Polish imports from India, widening the trade deficit.

Source: Ministry of Commerce and Industry, Govt. of India

As of FY 2023-24, Poland’s imports from India are approximately twice as large as its exports. Poland is India’s largest trading and investment partner in Central & Eastern Europe – looking at the data between 2013 and 2023. Nevertheless, despite some progress, the overall trade volumes between India and Poland remains limited. Overall, India is Poland’s 36th largest export market and 24^th largest import partner.

Source: Ministry of Commerce and Industry, Govt. of India

Source: Ministry of Commerce and Industry, Govt. of India

Investment

Bilateral investment relations have shown promise, with Indian companies active in various sectors in Poland, from IT to manufacturing. Per the Embassy of India in Poland, Indian investment into Poland amounts to over US$3 billion, while total Polish investment in India is estimated at US$685 million.

Prominent Indian companies in Poland:

1. ArcelorMittal
2. Videocon
3. Escorts
4. Strides Arcolab
5. Ranbaxy
6. EsselPropack
7. KPIT Cummins
8. Zensar Technologies Ltd
9. Tata Consultancy Services
10. HCL Technologies Ltd
11. Infosys
12. Wipro
13. Jindal Stainless
14. Berger Paints India
15. UFLEX
16. Glenmark Pharmaceuticals
17. Rishab Instruments
18. CRISIL

Polish companies operating in India include the TZMO Group in Dindigul (manufacturing hygiene and sanitary products), Can-Pack Poland in Aurangabad (manufacturing metal packaging), Geofizyka Torun, Famur Group, Solaris (eco buses) and Ekolog (waste to energy), per data from the Embassy of India in Poland.

Scope for sectoral collaboration

• Mining/energy: Poland’s expertise in clean coal technologies has significantly contributed to India’s mining and power sectors. An MoU signed on February 4, 2019, aims to further bilateral cooperation in coal and mining. Polish public sector companies have also trained Indian engineers in intelligent mining techniques.
• Agro-food Processing: Poland’s advanced food processing technologies are well-regarded. Polish companies are encouraged to participate in India’s Mega Food Parks, and a Joint Working Group on Food Processing has been established to enhance collaboration.
• IT and ICT: Indian and Polish IT companies complement each other, with about 11 Indian IT firms, including Infosys and HCL, operating in Poland. The growing Polish IT sector, supported by rising incomes and high computer literacy, has attracted Indian companies for near-shoring operations in Europe.
• Pharmaceuticals and chemicals: Poland’s chemical industry is significant, with India being a major exporter of chemicals, particularly organic ones. Opportunities exist for Indian exporters in OTC drugs, food supplements, and generic drugs. Poland relies on India for critical active pharmaceutical ingredients and raw materials.
• Textiles: Textiles remain the largest export segment from India to Poland, with exports reaching US$645 million in 2023. Despite this growth, there is potential for further expansion in the sector with improved conditions for Indian exporters.
• Engineering: Polish public sector companies have previously contributed to India’s mining and power sectors through machinery supply, technical know-how, and training, continuing their role in sector development.

Time to re-evaluate the roadmap for economic ties

Trade relations between Poland and India have steadily grown over the years, yet they still fall short of realizing the full potential of their economic partnership. Experts highlight that Poland is a key growth engine within the EU, while India has consistently been the world’s fastest-growing major economy. Poland offers a large internal market of over 38 million consumers and provides easy access to the broader EU market, with its 500 million consumers, as well as other countries in Eastern Europe.

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Jakub Kamiński, Senior Consultant, Export Support Department, Polska Agencja Inwestycji i Handlu (PAIH), told India Briefing, “Greater bilateral trade volumes may also be influenced by a free trade agreement between the European Union and India, but negotiations on this issue have been ongoing for years, and at this point it is difficult to indicate when the process will end positively.”

PAIH is the Polish government’s trade and investment agency.

Kamiński added, “India is worth considering an investment in local production – under the “Make in India” program, India has a system of incentives for starting production locally, and this also makes it possible to bypass various trade barriers.”

India’s emergence as a global powerhouse has been solidified in recent years, with the U.S., EU, and Western European nations deepening their collaboration with the country. However, progress in India-Poland relations has been limited. For Poland to strengthen its approach to India, it must craft a compelling cooperation strategy and allocate more resources to enhancing bilateral relations and exploring new economic opportunities with India.

Poland, with its significant investment in modernizing and expanding its armed forces, can be a good business partner for India, helping it reduce its dependence on Russia for arms supplies. In mining, too, Poland has attractive technologies to offer India, which will remain heavily dependent on coal consumption for decades to come. Both sectors were discussed between the two PM today, and the elevation of the relationship to the status of a strategic partnership offer hopes for a deepening of mutual relations. – Jakub Kamiński, Polska Agencja Inwestycji i Handlu (PAIH)

Recognizing missed opportunities in Asia

India-Poland relations have remained stagnant for a decade, owing to lack of political engagement, coupled with slow progress in economic and cultural collaboration. The state of bilateral ties can be described as cordial but lacking in substance and intensity.

Despite Asia’s rising importance, Poland’s trade with the region remains small. In 2022, only 5.1 percent of Poland’s exports went to Asia, while 29.2 percent of its imports came from there, leading to a burgeoning trade deficit. In 2021, Poland sent just 2.78 percent of its exports to East Asia and the Pacific, compared to 9.2 percent for Sweden, 11.75 percent for France, and 13.4 percent for Germany. Asian investments in Poland totaled US$11.5 billion in 2022, with South Korea and Japan as leading investors. However, Poland’s investments in Asia were much lower, at US$1.5 billion. Cultural and scientific exchanges between Poland and Asia have also lagged those between Asia and Western European countries.

Efforts to foster dialogue through multilateral forums, such as the Visegrad Group (an informal political and cultural alliance of four Central European countries: the Czech Republic, Hungary, Poland, and Slovakia), the EU, or ASEM (forum for cooperation and dialogue between Asia and Europe) have been underutilized. Despite key Polish figures holding prominent EU positions, including Donald Tusk’s presidency of the European Council (2014-2019) and Polish diplomat Tomasz Kozłowski’s role as the EU ambassador to India (2015-2019), Poland missed the opportunity to reshape EU-India relations or capitalize on growing EU-India cooperation.

Nonetheless, several notable decisions over the last decade have laid the groundwork for enhanced future collaboration. Poland opened a cultural institute in New Delhi in 2012, and the Polish Investment and Trade Agency – PAIH – established an office in Mumbai in 2018. LOT Polish Airlines began direct flights between Warsaw and New Delhi in 2019 (though these were interrupted by the pandemic and resumed in 2022). Such developments have made Poland a more attractive destination for Indian students, with their numbers growing from 263 in 2010-2011 to 2,449 in 2021-2022.

Next steps

According to media reports, further discussion between India and Poland shall take place in the next Joint Commission for Economic Cooperation (JCEC) meeting scheduled for the end of 2024.

Furthering investment and R&D cooperation across multiple sectors will remain a priority – technology, defense manufacturing, agriculture, agri-tech, food- tech, energy, climate, green technologies, infrastructure, smart cities, healthcare, pharmaceuticals, and mining.

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