Navigating India-Türkiye Relations: Opportunities and Challenges

India and Türkiye have a multifaceted relationship marked by both growing challenges and significant opportunities. Although political and diplomatic tensions have at times impacted the relationship, economic engagement and emerging collaborations show potential for growth. Both nations have prioritized strategies to overcome diplomatic obstacles, especially through a focus on business and trade alliances. This analysis explores the key dynamics influencing the India-Türkiye relationship, including defense considerations, emerging dispute resolution mechanisms, economic ties, and new avenues for collaboration amid evolving geopolitical landscapes.

Diplomatic relations and defense dynamics

India and Türkiye’s diplomatic relationship has been complex, primarily affected by Türkiye’s strong political and military alignment with Pakistan, particularly regarding the Kashmir issue. Türkiye has strengthened its defense ties with Pakistan by providing equipment such as drones and submarines, actions that have prompted India to reassess its defense exports to Türkiye.

Prime Minister Narendra Modi’s last attendance at an official event in Türkiye was during the G20 summit in 2015, highlighting the cautious diplomatic stance India has maintained in recent years. Further, India has instead focused on exploring other avenues for engagement with key Turkish trade and economic players outside of defense.

Revitalizing economic relations through ADR partnership

Despite the diplomatic challenges, economic cooperation between India and Türkiye has found a new pathway through an Alternative Dispute Resolution (ADR) partnership. In June 2024, India and Türkiye launched a Memorandum of Understanding (MoU) between the Asia-Pacific Centre for Arbitration & Mediation (APCAM) and the Union of Chambers and Commodity Exchanges of Türkiye’s Arbitration Center (TOBBUYUM). This initiative is led by key figures, including APCAM Chairman Anil Xavier and TOBBUYUM’s General Manager Dr. Onur Yuksel, who have emphasized ADR’s role in creating a more reliable environment for cross-border trade and investment.

The ADR partnership was formalized with support from Türkiye’s Ministry of Law and Justice, signaling a mutual recognition of the importance of efficient dispute resolution in promoting trade. By facilitating ADR processes, the MoU seeks to ease the handling of commercial disputes, reduce litigation costs, and support investment flows between India and Türkiye.

Economic cooperation and trade relations

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Despite the geopolitical dynamic, trade between India and Türkiye has shown resilience. In the fiscal year 2022-23, total bilateral trade between the two countries reached US$13.8 billion, though it saw a decline to US$10.4 billion in FY 2023-24. Indian exports to Türkiye consist primarily of vehicles, machinery, and mineral oils, while Türkiye exports mineral fuels, machinery, and essential oils to India. These trade flows underline continued importance of economic exchanges in sustaining bilateral ties.

India and Türkiye also have foundational economic agreements in place, including the Agreement on the Avoidance of Double Taxation (1996) and the Agreement on Mutual Assistance in Customs Matters (2015). These agreements provide a framework for smoother business operations between both countries, even as diplomatic relations face challenges.

Source: India Briefing

Although India and Türkiye have not signed a free trade agreement, Indian exporters can take advantage of discounted tariffs on specific goods under the Generalized Preferences System (GSP) applied by the European Union, which includes Türkiye.

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

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

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

Commercial ties

Indian companies have invested around US$126 million in Türkiye, according to data from the Central Bank of Türkiye, while Turkish investments in India total approximately US$210.47 million, per India’s Department for Promotion of Industry and Internal Trade (DPIIT). Türkiye ranks 44th in foreign direct investment (FDI) equity inflows into India, with cumulative FDI reaching US$220.07 million between April 2000 and March 2023.

According to the Indian Embassy, Turkish investments in India amount to around US$223 million. Prominent Turkish companies operating in India include Koç Holding (consumer durables), Arçelik A.S (home appliances), Doğuş Holding Doğuş Construction, Limak Holding, and Fernas (construction), as well as Sarar (menswear), Soktas (fabric, now owned by Grasim Industries Ltd), Çelebi Holding (aviation services), Orhan Holding (automotive supplier), and Hidromas (hydraulic products via Netherlands-based HMS Global). Many Turkish businesses in India operate through joint ventures, particularly in engineering, procurement, and construction (EPC) contracts, providing technical consulting and construction services.

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As of a June 2022 release by India’s Ministry of External Affairs, Indian companies are active in Türkiye’s automotive, pharmaceutical, and IT sectors, while Turkish businesses have established a presence in India’s infrastructure and engineering sectors. Türkiye offers Indian companies access to markets in Europe, Central Asia, and the Black Sea region, along with expanded Middle Eastern opportunities. Conversely, Turkish companies can leverage India as an Asian production base, benefiting from India’s expanding manufacturing sector and opportunities in infrastructure and logistics projects. Key Indian industries for Turkish investment include construction, medical tourism, and auto components.

The Turkish Indian Chamber of Commerce & Industry (TICCI), affiliated with Türkiye’s business confederation TUSKON, has offices in Bengaluru, Chennai, New Delhi, Hyderabad, Kolkata, and Mumbai. TICCI facilitates trade connections, joint ventures, and alliances and has signed a memorandum of understanding (MoU) with ASSOCHAM (Associated Chambers of Commerce and Industry of India).

New opportunities for Indian professionals

Türkiye has introduced updated labor regulations and the Tech Visa Program to attract international talent, including professionals from India. These regulations allow foreign workers to benefit from relaxed work permit renewal requirements, especially in fields such as technology and finance. The Tech Visa aims to attract skilled professionals to support Türkiye’s rapidly growing tech sector, which offers a range of opportunities for Indian professionals considering employment in Türkiye.

With Türkiye’s minimum wage currently at approximately INR 41,891 per month (US$498.18), Indian professionals evaluating opportunities in Türkiye’s tech industry may consider local cost-of-living factors. Meanwhile, Türkiye has targeted 350,000 Indian tourists for 2024, emphasizing efforts to strengthen cultural and people-to-people ties with India, which can help improve bilateral relations on a socio-cultural level.

Outlook: Navigating complex ties amid geopolitical tensions

India and Türkiye’s relationship exemplifies the challenges and opportunities that can arise when two emerging economies engage in a dynamic geopolitical landscape. Türkiye’s aspirations to join BRICS, combined with its foreign policy goals, may continue to influence the trajectory of its relationship with India. However, as seen with the ADR partnership and recent labor regulations, both countries are actively pursuing initiatives that will keep economic ties strong.

The path forward for India and Türkiye will involve carefully balancing political differences while leveraging mutual economic interests to drive collaboration. By focusing on areas like trade, investments, and people-to-people exchanges, India and Türkiye have an opportunity to foster more stable and productive relations. Successfully navigating these complex landscapes will enable both nations to benefit from a pragmatic and constructive bilateral relationship in the years ahead.

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