India and the Czech Republic: Trade and Investment Profile

Economic relations between India and the Czech Republic have strengthened significantly since the Czech Republic’s accession to the European Union in 2004. This development, along with enhanced cooperation mechanisms, led to a revival of bilateral trade, increasing from US$86 million in 1993 to over US$2.12 billion in FY 2023-24.

As of 2024, the Czech Republic is exploring opportunities to expand its focus beyond automobile manufacturing in India and is seeking to establish a strategic partnership with India in the defense equipment sector.

In early 2024, Indian Prime Minister Narendra Modi and Czech Prime Minister Petr Fiala agreed to elevate bilateral relations to a Strategic Partnership on Innovation. This partnership will focus on key areas such as artificial intelligence, electromobility, and semiconductor technology, critical for advancing high-tech industries.

While negotiations for a free trade agreement (FTA) between India and the EU continue, there is strong potential for deepening military and space cooperation between India and the Czech Republic. By leveraging shared interests and building mutual trust, both nations are well-positioned to foster innovation and strengthen their economic and defense ties.

India has been actively strengthening its global economic ties, with the Czech Republic playing a significant role in these efforts.

India-Czech economic relations

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India’s engagement with the Czech Republic was prominently highlighted during the 12th Session of the India-Czech Republic Joint Commission on Economic Cooperation (JCEC), held in New Delhi on December 5, 2023. The session, co-chaired by India’s Commerce Secretary and the Director-General of the Czech Ministry of Industry and Trade, examined the importance of collaboration in key sectors such as engineering, industrial machinery, renewable energy, mining, defense, aerospace, pharmaceuticals, and information technology.

The latest rounds of discussions between the two countries focused on leveraging mutual strengths in sectors like infrastructure development, environmental technologies, and agriculture, indicating a clear roadmap for enhanced trade and investment.

Sector-wise cooperation between India and Czech Republic

India-Czech military cooperation

Experts highlight that beyond trade, there is significant potential for military cooperation between India and EU member states, including the Czech Republic. Discussions have been shaped by concerns over data security, particularly regarding the transfer of defense technology. The Czech Republic is keen to collaborate with India on defense modernization, offering spare parts, technology, and expertise to bolster military ties.

Despite bureaucratic challenges and the sensitive nature of defense cooperation, both countries recognize the geopolitical importance of the Indo-Pacific region. India is seen as a key player in this area, and as it seeks to diversify its defense partnerships and modernize its armed forces, collaboration with EU nations, including the Czech Republic, becomes increasingly vital.

The two countries advanced their defense collaboration with the signing of a Memorandum of Understanding in October 2003. Since then, six Joint Defense Committee meetings have been held, with the most recent taking place in February 2020 in New Delhi. Czech defense companies continue to regularly supply military equipment to India’s armed forces.

Science and technology cooperation

In 2019, 20 collaborative projects were selected from 187 proposals in areas like defense, nuclear energy, AI, and nanotechnology. Notably, the Czech nanosatellite VZLUSAT-1 was launched by ISRO in 2017, developed in collaboration with Czech universities.

Space cooperation

In terms of space cooperation, India and the EU share common goals in fields like artificial intelligence, satellite technology, and surveillance. According to the Czech Ambassador, Dr Eliska Zigova, collaborative projects in these areas not only promote knowledge exchange but also drive scientific innovation and development.

Recent initiatives, such as hosting Indian space companies and forming strategic partnerships in science and technology, underscore the growing convergence of interests between India and the Czech Republic. Earlier this year, Indian scientists visited the European Space Agency to explore the potential for joint ventures in military technology and space research. Additionally, a group of companies is scheduled to visit the Indian Space Research Organisation (ISRO) later this year, with the possibility of future partnerships in space exploration and technology.

Educational cooperation

Czech universities have a long history of Indology and currently teach Indian languages. Around 1,500 Indian students’ study in various Czech institutions, and the Czech government has expanded it fast-track visa program for Indian professionals and students.

India-EU Free Trade Agreement (FTA)

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The Czech Republic, as a member of the EU, plays a crucial role in India’s broader efforts to strengthen economic partnerships within the EU. The ongoing negotiations between India and the EU for a Free Trade Agreement (FTA) have strategic importance for individual member states like the Czech Republic. Although these negotiations have encountered challenges, they remain a priority for both parties, particularly due to the potential for increased trade in high-tech sectors such as industrial machinery, renewable energy, and defense.

In an interview, Ambassador Zigova noted that negotiating an FTA between India and the EU has been complex due to the diversity and scale of both India and the EU. Despite the ongoing challenges, the Ambassador emphasized that both sides are committed to promoting free and secure trade.

Ambassador Zigova emphasized that the India-EU Free Trade Agreement (FTA) negotiations are strategically important for both regions. Despite the geographical and cultural differences between India and the EU, their shared goal of advancing trade provides a solid foundation for discussions. The complexity of the negotiations arises from the need to reconcile the diverse interests of the 27 EU member states and India’s 28 states and 8 territories. Nevertheless, both sides remain committed to reaching a mutually beneficial agreement.

The negotiation process has been lengthy, involving multiple rounds of discussions. Each round presents unique challenges, as both parties must address contentious issues such as trade tariffs and regulatory standards while navigating a wide range of economic sectors. Despite these difficulties, the Ambassador noted that both India and the EU are dedicated to resolving disputes and progressing forward.

Although significant progress has been made, frustrations persist on both sides due to perceived delays and competing priorities. However, the EU’s meticulous approach to the negotiations underscores its commitment to ensuring that the final agreement is both comprehensive and sustainable. Once signed, the FTA will mark a major milestone in India-EU relations, paving the way for greater economic collaboration and growth.

India-Czech Republic trade relations

With Czech policy focusing on trade diversification outside the EU, bilateral trade has surged to over US$2.12 billion in FY2024-25 from US$1.94 billion in FY2022-23.

Source: Department of Commerce, Ministry of Commerce and Industry, GoI

India primarily exports smartphones, medicines, chemical compounds, stainless steel pipes, and automotive brake parts to the Czech Republic. The Czech Republic exports automotive engines, rubber, drive-axles, gas analysis apparatus, and steel containers to India.

Source: Department of Commerce, Ministry of Commerce and Industry, GoI

Source: Department of Commerce, Ministry of Commerce and Industry, GoI

India-Czech Republic double tax treaty

The India-Czech Republic Double Taxation Avoidance Agreement (DTAA) was signed to prevent the imposition of taxes on the same income by both India and the Czech Republic. This treaty, which came into effect on September 27, 1999, promotes cross-border trade and investment and ensures that businesses and individuals operating in both countries are protected from double taxation. The tax treaty has been subsequently amended to align with the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The existing taxes to which the Convention shall apply are:

(a) In India:

• the income-tax, including any surcharge thereon;
• the wealth-tax,
  (hereinafter referred to as “Indian tax”);

(b) In the Czech Republic:

• the tax on income of individuals;
• the tax on income of legal persons;
• the tax on immovable property,
  (hereinafter referred to as “Czech tax”).

Source: Income Tax Department, GoI

Czech business presence in India

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Approximately 7 percent of Czech investments outside Europe are directed toward India, with over 30 Czech companies actively operating in sectors such as transport, energy, and finance. Some of the key Czech investors in India include Škoda Auto, Doosan Škoda Power, and Tatra Trucks.

The Czech brand Bata is a well-established and popular name in India’s footwear market. In the automotive industry, Škoda enjoys a pan-India recognition in the country.

Czech companies operating in India:

1. Škoda Auto
2. Omnipol
3. Tatra Trucks
4. VíTkovice Machinery Group
5. Howden CKD Compressors
6. VH-services spol s.r.o.
7. Aircraft Industries, a.s.
8. ZETOR, a.s.
9. BONATRANS GROUP A.S
10. BTL zdravotnická technika, a.s.
11. FANS, a.s.
12. ZKL Bearings CZ
13. Gearspect Group a.s.
14. TAJMAC – ZPS, a.s.
15. SIGMA GROUP a.s.

Other automotive companies from Czech Republic are also expanding their presence in India. Tractor manufacturer Zetor has set up manufacturing facilities with Indian partners, and Bonatrans, which produces rail components, has partnered with Indian firms to modernize India’s rail infrastructure. For instance, Bonatrans supplies the braking systems for the Delhi Metro.

Indian investments in the Czech Republic

Indian companies have also made notable investments in the Czech Republic, particularly in sectors like IT, electronics, telecommunications, textiles, pharmaceuticals, automotive components, and food industries. Significant Indian firms such as Infosys, Varroc Lighting, and Glenmark Pharmaceuticals have established their presence in the Czech Republic, with key investments primarily focused on IT, electronics, and pharmaceuticals.

Noteworthy Indian companies operating in the Czech Republic include Infosys, APAG Elektronik, Varroc Lightning Systems, Glenmark Pharmaceuticals, and MSSL Advanced Polymers. Additionally, Indian-made Jawa motorcycles are now exported to the Czech Republic.

Furthermore, many Czech firms continue to be involved in India’s heavy engineering sector, bolstered by the creation of the Czech Industrial Cluster in Bengaluru in 2018.

Prospects for India-Czech collaboration

As the India-Czech dialogue progresses, both countries are committed to fostering a stronger partnership. The Czech Republic’s technological expertise, particularly in defense and industrial sectors, aligns well with India’s ambitions for modernization and innovation. Moreover, collaborations in fields such as pharmaceuticals, renewable energy, and information technology can provide mutual benefits, driving economic growth and innovation in both nations.

This expanding partnership reflects India’s broader diplomatic strategy of advancing economic relations on multiple fronts. While significant strides have been made with other EU counterparts, the deepening engagement with the Czech Republic highlights the diverse and growing opportunities for collaboration that will benefit both countries.

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