India-Belgium Bilateral Relations: New Areas of Focus

India and Belgium have been strengthening bilateral ties, particularly in the areas of economic and political cooperation. On April 9, 2024, Theodora Gentzis, Secretary-General of the Belgian Ministry of Foreign Affairs, met with India’s External Affairs Minister, S. Jaishankar, to discuss collaboration on semiconductors, green growth, and issues concerning the diamond industry.

Earlier, on March 26, 2024, Belgian Prime Minister Alexander De Croo held a telephonic conversation with Indian Prime Minister Narendra Modi, emphasizing commercial opportunities in pharmaceuticals, semiconductors, and green hydrogen. During this call, he also announced a royal trade mission to India.

Accelerating areas of collaboration

In April 2024, per a statement from India’s Ministry of External Affairs, the two countries agreed to expedite the finalization of a Migration and Mobility Partnership Agreement. This decision was made during the second India-Belgium Foreign Office Consultations held in New Delhi, where both sides discussed a range of topics, including trade, technology, and collaboration in international forums. The talks also focused on strengthening ties with the European Union and addressing key global issues such as green energy transitions and the pharmaceutical sector.

Both nations have also reaffirmed their commitment to enhancing the India-EU Strategic Partnership during Belgium’s current presidency of the Council of the European Union. They are working towards finalizing a mutually beneficial India-EU Free Trade Agreement (FTA). Other key areas of discussion included semiconductors, cyber technology, science and technology cooperation, UNSC reforms, and multilateral collaboration, highlighting the importance of ongoing institutional dialogue.

The consultations were preceded by the 18th Joint Economic Commission meeting between India and the Belgium-Luxembourg Economic Union (BLEU), co-chaired by officials from India and Belgium.

Economic relations

India and Belgium collaborate in areas like science, technology, renewable energy, and space. Key initiatives include joint work on optical telescopes, liquid mirrors, and nuclear research. Cooperation extends to education, with multiple Memorandum of Understanding (MoUs) signed between Indian and Belgian universities.

Trade and commercial relations

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Belgium is one of India’s key trade partners in the EU, particularly in the diamond trade. In 2022, bilateral trade in goods totaled €15.1 billion, with India exporting €8.1 billion and importing €7 billion. Belgium is also a significant investor in India, with a total FDI of US$2.763 billion from April 2000 to December 2022.

Trade relations between the two countries are significantly influenced by the exchange of precious metals and stones, especially non-industrial diamonds. Belgian exports to India dropped by 33.5 percent in 2020 due to the pandemic but rebounded with increases of 38.3 percent in 2021 and 13.7 percent in 2022. However, in 2023, exports declined again by 30.3 percent, primarily due to a reduction in the trade of precious metals and stones.

Jewelry trade

According to Volza’s India Export data, India shipped 2,681 batches of artificial jewelry to Belgium between March 2023 and February 2024. These exports were carried out by 127 Indian companies to 222 buyers in Belgium, reflecting a 12 percent increase compared to the previous year.

In February 2024 alone, India exported 282 shipments of artificial jewelry to Belgium, which is a 19 percent increase from February 2023 and a 37 percent jump from January 2024.

India is one of the top exporters of artificial jewelry worldwide, with most of its exports going to Belgium. Globally, the leading exporters of artificial jewelry are China (2.5 million shipments), India (2.36 million shipments), and Vietnam (1.79 million shipments).

India-Belgium merchandise trade

India’s exports to Belgium fell by 16.4 percent in 2020 but rebounding with 58.0 percent and 33.1 percent growth in 2021 and 2022. However, 2023 saw a 22.1 percent drop in imports due to lower values in precious metals, base metals, and chemical products. Despite this, precious metals and stones remained Belgium’s top imports from India, accounting for 34.6 percent of the total value.

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

In 2023, precious metals and stones made up 52.5 percent of Belgium’s exports to India, followed by machinery and equipment (12.2 percent) and chemical products (10.6 percent). On the import side, after precious metals, the largest categories were chemical products (18.8 percent) and base metals (13.6 percent).

Other notable categories in trade included textiles, plastics, optical instruments, and mineral products, which saw significant fluctuations in both imports and exports. The only product group to experience growth in Belgian imports from India in 2023 was mineral products, which increased by 89.3 percent, driven mainly by higher imports of medium oils.

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

India-Belgium service trade ties

In 2023, Belgium’s exports of services to India increased by 9.3 percent, reaching €448.3 million, making India Belgium’s 30th largest services client. Meanwhile, Belgium’s imports of services from India fell by 8.1 percent to €753.1 million, placing India as Belgium’s 21st largest supplier. Belgium consistently had a trade deficit with India in services from 2019 to 2023, although this deficit decreased to €304.8 million in 2023 due to growing exports and declining imports.

Source: Belgian Foreign Trade Agency

On the service exports aspect, other business services also led, making up 44.3 percent of India’s export to Belgium, followed by communication services (32.7 percent) and transportation services (10.3 percent). The decline in Belgian imports from India was primarily due to reductions in communication services (-16.3 percent) and transportation services (-35.6 percent).

Source: Belgian Foreign Trade Agency

The largest category of Belgian service exports to India in 2023 was “other business services,” accounting for 34.1 percent of the total, followed by communication services at 30.1 percent, and transportation services at 16.7 percent. Growth in imports was driven by a 22.5 percent increase in other business services, as well as rising communication and construction services.

Source: Belgian Foreign Trade Agency

Overall, the growth in certain services groups, like financial services and business services, helped reduce the trade deficit. However, declines in communication, transportation, and goods-related services led to a negative balance in 2023.

India-Belgium Double Taxation Avoidance Agreement (DTAA)

The India-Belgium Double Taxation Avoidance Agreement (DTAA) prevents residents of both countries from being taxed twice on the same income. It covers various income types, including business profits, dividends, interest, royalties, and capital gains.

Source: Doing Business Guide, India Briefing

Moving from diamond trade to renewable energy sector

India and Belgium are strengthening their renewable energy collaboration, particularly in hydrogen, wind, and energy storage sectors. In 2022, Indian energy developer Greenko partnered with Belgium’s John Cockerill to establish a 2GW green hydrogen electrolyzer plant in India. This partnership aims to accelerate green hydrogen projects, reduce energy imports, and potentially enable energy exports.

Belgium’s Wallonia region is also fostering renewable energy collaborations with India, supported by the Walloon business cluster TWEED. A 2022 trade mission from Wallonia explored market expansion and technological cooperation opportunities, engaging major Indian companies like Reliance and Tata.

Beyond hydrogen, Belgium’s John Cockerill, known for alkaline electrolyzer technology, is co-investing in an electrolyzer plant in India. Additionally, Indian firms such as Jindal and ELGI Equipment have set up operations in Wallonia, further deepening the collaboration.

As India emerges as a global renewable energy hub, Belgium provides technological expertise and innovation, strengthening both nations’ positions in the green energy landscape.

Untapped trade potential between India and Belgium

Belgium presents a promising yet underutilized market for India’s exports, as revealed by an analysis conducted by an industry assessment agency. The study highlights that India’s export portfolio aligns well with Belgium’s import needs, offering significant untapped potential for trade growth. Despite this complementarity, Belgium currently accounts for a relatively low share of India’s total exports.

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As per the research titled, “Trade: The Fulcrum of India’s Growth”, emphasize the critical role of trade in economic development and outlining strategies to meet India’s ambitious US$2 trillion export target by 2030. Within the report, experts note that the global geopolitical landscape provides India with an opportunity to establish strategic partnerships with like-minded nations, such as Belgium, to strengthen its trade prospects.

To achieve this export goal, India needs a compound annual growth rate (CAGR) of 12 percent for merchandise and 18 percent for services. According to the report, India should focus on sectors where it holds a revealed comparative advantage (RCA), such as intermediate and consumer goods in merchandise and telecommunication and IT services in the services sector.

For Belgium, deepening trade relations with India could involve reducing non-tariff barriers and enhancing technology transfer and investment. By fully utilizing trade agreements, India and Belgium can further bolster their economic ties and unlock mutual growth opportunities.

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