India-Spain Bilateral Trade and Investment Profile

The bilateral relationship between India and Spain has developed into a multifaceted partnership encompassing political, economic, cultural, and strategic cooperation. Regular high-level interactions, including official visits and meetings at international forums such as the G20, demonstrate the growing significance of this relationship. In 2017, Indian Prime Minister Narendra Modi’s visit to Spain marked a key milestone, and in 2023, Spain’s Vice President attended the G20 summit hosted by India, reflecting the continued engagement between the two nations.

Spain, a key European partner, works with India on important projects in defense, renewable energy, and other global initiatives, deepening the scope of their diplomatic and economic partnership. Defense cooperation has gained momentum with India’s recent purchase of C295 cargo planes from Spain, and both countries are eager to expand collaboration in marine security and defense technologies. Regular high-level meetings, such as the India-Spain Foreign Office Consultations, further strengthen these ties.

India-Spain economic and trade cooperation

Economic and trade cooperation plays a pivotal role in India-Spain relations. Spanish companies are active in India’s infrastructure, renewable energy, and automotive sectors, while Indian investments in Spain are concentrated in IT services and pharmaceuticals. The India-Spain Joint Commission on Economic Cooperation (JCEC), which held its 12th meeting in 2023, plays a key role in boosting bilateral trade. The India-Spain CEOs Forum, established in 2015, further strengthens business ties. Both countries also collaborate on industrial research and development through the India-Spain Program of Cooperation, and India’s participation in various trade fairs in Spain is indicative of this growing relationship.

Bilateral trade

In 2023, bilateral trade between India and Spain reached US$8.25 billion, with India’s exports to Spain amounting to US$6.33 billion and imports totaling US$1.92 billion. India’s primary exports include mineral fuels, chemical products, iron and steel, electrical machinery, and apparel.

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In June 2024, India’s exports to Spain amounted to US$389 million, with imports reaching US$177 million. Key export growth areas included ready-made cotton garments, iron and steel, and telecom instruments. Imports from Spain also increased, driven by petroleum products, industrial machinery, and paper. India saw significant growth in exports of bulk drugs and telecom instruments, while Spain experienced increased demand for its petroleum products and industrial machinery.

The prospects for bilateral trade are promising, with significant opportunities in renewable energy, smart cities, and infrastructure. Spain, a global leader in renewable energy, aligns with India’s sustainability goals. Both nations are actively exploring opportunities in defense, IT, and healthcare, driven by India’s growing market and Spain’s expertise in these sectors.

Top traded items: India and Spain

Source: Trading Economics

Source: Trading Economics

Investment flow

Spain ranks as the 16th largest foreign investor in India, with cumulative FDI totaling US$3.94 billion as of December 2023. Over 280 Spanish companies operate in India, particularly in the metallurgical industries, renewable energy, automotive, ceramics and infrastructure (highways, transmission lines, tunnels and metro stations).

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Key investment destinations include Maharashtra, Tamil Nadu, Gujarat, Andhra Pradesh, and Karnataka. Meanwhile, Indian investments in Spain amount to approximately US$900 million, with around 80 Indian companies active in sectors such as IT services, pharmaceuticals, and chemicals. India is among the top five Asian investors in Spain.

Indian companies in Spain

Indian companies operating in Spain are primarily in Madrid and Barcelona, and across sectors such as iron and steel, pharmaceuticals, renewable energy, and IT. Indian multinationals like ArcelorMittal, Wipro, and Sun Pharmaceuticals have a significant presence, contributing to the local economy. Spanish subsidiaries of Indian IT firms employ substantial local workforces, and the pharmaceutical sector has witnessed Indian companies acquiring Spanish firms to expand their European footprint. Spain serves as a strategic hub for Indian companies to manage operations across Europe and Latin America.

Spanish companies in India

Spanish companies entered the Indian market later than those from other countries, establishing a presence after India’s 1991 economic liberalization reforms. Among the first to set up operations were Banco Sabadell in 1994, Grupo Antolín in 1996, and Grupo Mondragón in 1998. Since then, Spanish involvement has surged. Close to 300 Spanish companies are active across key economic hubs in India, primarily concentrated in metropolitan areas such as Delhi, Mumbai-Pune, Bangalore, and Chennai. Spain’s commercial and corporate presence spans multiple sectors, with significant involvement in infrastructure, construction, industrial engineering, advanced machinery, renewable energy, environmental sustainability, electronic and communication technologies (EICT), and the automotive industry, including automotive components. This highlights Spain’s contribution to growing India’s value chain and fostering the country’s competitive and sustainable economic growth.

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Spanish companies in India range from large corporations to SMEs involved in various sectors. Notable companies like Indra, Roca, and SIS-Prosegur have established significant operations, contributing to areas such as air traffic control, bathroom design, and ATM management. The presence of major companies has drawn in Spanish SMEs, particularly in sectors like renewable energy and automotive components.

Spanish businesses typically enter India through joint ventures with local partners, often evolving into full subsidiaries. Economic and commercial offices in New Delhi and Mumbai, part of Spain’s Embassy, assist Spanish companies with market entry and offer ICEX services, including organizing business meetings and partnerships.

Although Spain lacks a strong national brand recognition in India, Spanish companies have successfully attracted Indian consumers with innovative, high-quality products. Major fashion brands such as Zara, Mango, and Desigual have expanded significantly, while beauty and personal care brands like Iberchem and Skeyndor have also established a presence. E-commerce is a growing frontier for Spanish brands, with companies like Zara enhancing their online presence in India. Spanish companies have shown adaptability to the Indian market, with examples like Roca, Lladró, and fashion brands adjusting their products to local consumer preferences.

Bilateral agreements

India and Spain have established 26 bilateral agreements, covering a wide range of sectors, from trade and cultural cooperation to civil aviation and defense. Key agreements include:

1. Agreement on Trade and Economic Cooperation (1972)
2. Civil Aviation Agreement (1986)
3. Double Taxation Avoidance Agreement (1993)
4. Bilateral Investment Protection and Promotion Agreement (1997)
5. Extradition Treaty (2002)
6. Mutual Legal Assistance Treaty on Criminal Matters (2006)
7. Memorandum of Understanding on Agriculture and Allied Fields (2009)
8. MoU on Defense Cooperation (2012)
9. Protocol for amending the Convention and Protocol between India and Spain for the avoidance of double taxation and the prevention of fiscal evasion concerning taxes on income and on capital originally signed in February 1993 in New Delhi (2012)

In addition, several other agreements are under negotiation, underscoring the commitment to deepen bilateral engagement across multiple areas.

India-Spain DTAA

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The India-Spain Double Tax Avoidance Agreement (DTAA) covers capital and income taxes in both countries to prevent double taxation and tax evasion. In Spain, it applies to individual income tax, corporate tax, and capital tax, while in India, it covers income tax, surtax, and wealth tax. The DTAA also extends to future comparable taxes, ensuring flexibility.

Key tax provisions include:

• Tax rates: Dividends are taxed at 15 percent, interest at 15 percent, and royalties or technical service fees at 10 percent.
• Capital gains: Gains from movable property, such as stocks, are typically taxed in the seller’s home country, eliminating double taxation.
• Employment income: Employees working in one state for less than 183 days are taxed only in their home state. For longer stays, the DTAA allows for tax offsetting to prevent double taxation, encouraging cross-border employment and economic cooperation.

Overall, the DTAA fosters economic activity between the two countries by reducing tax burdens and promoting clarity on income and capital gains taxation.

Outlook

India and Spain’s evolving economic and diplomatic relationship holds significant promise, with key areas of cooperation including trade, investment, renewable energy, infrastructure, and defense. Spanish expertise in renewable energy, infrastructure, and environmental technology complements India’s expanding market, particularly in sectors like IT, automotive, and healthcare. Initiatives like “Make in India” and “Digital India” create favorable conditions for further collaboration, encouraging foreign direct investment.

As both countries continue to leverage their mutual strengths, the future of India-Spain bilateral ties looks bright, with enhanced economic cooperation and innovation-driven partnerships on the horizon.

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