Home Europe India and Czech Republic: Evolution of Economic and Commercial Relations

India and Czech Republic: Evolution of Economic and Commercial Relations

Bilateral relations between two countries are maintained at various levels. Cordial economic and commercial relations is one such aspect which not only helps in strengthening bilateral relations but has also become one of the most important factors in contemporary geopolitical scenario.

Economic relations between India and Czech Republic (formerly Czechoslovakia) date back to the Middle Ages when people to people contacts were established. Exchange of history, language, culture and ideas culminated into trade relations between the two countries. In 1920 and 1929 Czechoslovakia established its consulate in Bombay and Kolkata respectively. Although trade relations existed between them prior to independence, they further expanded when diplomatic relations between the two countries were established formally on November 18, 1947. Both the countries signed an extensive trade agreement in 1957 when Czechoslovakia was under the Soviet influence. At that time, Czechoslovakia was one of the largest trading partners of India in Central Europe.

The Czech Republic was formed in the year 1993 after bifurcation of Czechoslovakia into Czech Republic and Slovakia and high-level exchanges have been maintained between India and Czech Republic since then. Initially there was a slowdown in economic activities owing to the transformation of economic policies both in India and Czech Republic. However, both the countries initiated new mechanisms and adopted diversification which has resulted into an upswing in the bilateral trade.

The bilateral trade between Czech Republic and India has seen a substantial improvement from US $ 153 million and US $258 IN 2001 and 2002 to US$ 1572 and 1567 in 2018 and 2019 respectively.2 In terms of bilateral investment, about 30 Czech companies have invested in India. Some of the major Czech companies in India are Skoda, Bonatrans Group, Stros, Preciosa, Hamrik.  These companies deal with various sectors like transport, energy, automotive. Indian companies have invested in sectors like Information and technology, pharmaceutical, auto components, textile. Major Indian companies which operate in Czech Republic are Infosys BPO, Glenmark Pharmaceuticals Distribution, Tata Global Beverages Czech Republic, Cafe Coffee Day.

The bilateral trade between the two countries includes a range of products. Indian exports to Czech Republic include textiles, iron and steel products, pharmaceutical products, auto components, apparel and clothing, engineering items, power equipment. India imports a variety of products from Czech Republic including Information and communication technology equipment, furniture, pumps, rubber materials, road vehicles, boilers, electrical machinery. According to the United Nations COMTRADE database on international trade, the bilateral trade between Czech Republic and India in 2021 was about US $1776.37 million (Czech Republic imports from India were US $ 1.22 billion and India’s imports from Czech Republic were US $ 576.37 million).

Over the years, India- Czech Republic have signed various agreements to enhance and diversify the economic engagement and ensure ease of investment and business between the two countries. The agreements have been signed in different sectors including economic cooperation, Science and Technology, Defence and Civil Aviation, Nuclear cooperation. This diversification has facilitated mutual trade and investment between the two countries   The Agreement for the Promotion and Protection of Investments (1996) led to the creation of an enabling environment for investments by investors.

India has Double Taxation Avoidance Agreement with Czech Republic which promoted a growth in investments. The agreement targets avoidance of double taxation and the prevention of fiscal evasion. It ensures that cross country investments are promoted without any ambiguity. The Agreement on Economic Cooperation, 2010 emphasized on information exchange on economic development, bilateral trade and economic plans. It called for identification of investment opportunities and facilitation of investment flows between the two countries.

The Social Security Agreement signed in 2010 further facilitates the ease of doing business and opens investment opportunities in both the countries. It ensures the protection of interests of cross- border workers. It intends to avoid double coverage and workers of both the countries are treated equally in terms of social security.

During President Ram Nath Kovind’s visit to Czech Republic on September 6, 2018, five major agreements were signed between the two countries. These agreements included cooperation in the field of science and technology, laser technology, life sciences and visa waiver of diplomatic passport holders. In addition to this, they also agreed to cooperate in the field of civil nuclear energy which holds immense growth potential in trade, technology and investment. President Kovind described the Czech Republic as ‘a leading economic partner’. He emphasized that India’s growth story and Czech’s technological expertise and manufacturing prowess made them ‘natural partners’.

During the 11th session of India -Czech Republic Joint Commission on Economic Cooperation (22-23 October 2018), a joint protocol was signed between the two countries. This protocol sought cooperation in the fields of Engineering and Industrial Machinery, Defence, Pharmaceuticals, Agriculture Products, Environmental and Agriculture technologies, AYUSH, Energy, Mineral Resources and Mining.  Both the countries have a shared vision against global protectionism and sought for promotion of multilateral and inter- regional trade.

India’s relations with the European Union have also been on a rise and Czech Republic holds immense importance for India as a Central European country. India offers a market of about one billion customers to Czech products. At the same time, India recognizes that Central Europe through Czech Republic holds an important gateway to the European Union market. The India – Central Europe Business Forum is a platform which provides strategic collaborations and hands on understanding of business opportunities in both the regions. The focus areas in this forum are IT and ITES, Clean and Green Technologies, Pharmaceuticals, Life Sciences, Environmental Technologies, Agri and Food Processing, Auto and Auto Components, Tourism. It focusses on enhancing India’s engagements with Central European economies in a structured format. Till now four editions of India Central Europe Business Forum have been organized in different cities in India. This has established business engagements between representatives of Indian industry and their Central European counterparts.

India and Czech Republic have a shared vision on rules based multilateral trading system and both the countries are in favor of finalizing the ambitious Broad -Based Trade and Investment Agreement (BTIA) between India and European Union. In the 11th session of India- Czech Republic Joint Commission on Economic Cooperation in Prague, Czech Republic emphasized on the importance of India as a trade partner of the European union. The Czech representatives noted that liberalization of the markets in the European Union would be beneficial and a win -win situation for both the sides.

In the contemporary global order, bilateral relations are influenced and shaped by the geopolitical scenario. In the recent context of rising discord with China and sanctions regime with Russia, Czech Republic included India in the top 12 priority countries with whom it wants to strengthen its economic ties.

The 21st century offers opportunities at the global level and India and the V4 countries (also called as the Visegrád Group) are gradually revitalizing their ties. The V4 countries are Czech Republic, Poland, Hungary, Slovakia. India and the V4 countries are trying to revive and strengthen the old trade linkages and increase the high- level visits. This also implies an expansion of business exchanges between the two regions. Czech Republic, along with the V3 countries have shown an unequivocal support for India’s bid at the United Nation’s Security Council (UNSC) and its membership in Nuclear Supplier Group (NSG).

Going forward, India and Czech Republic should explore the new areas of cooperation that can give a boost to the trade ties. Recently Tamil Nadu invited investments from Czech Republic based light aircraft manufacturer Evektor Aircraft. Defence sector is another potential sector for further strengthening the trade ties. In fact, India is opening up to defence companies in Prague to set up joint ventures in the latest technology.  India had also signed a protocol for cooperation in the field of heavy industry. This includes modernization of three plants of Heavy Engineering Corporation and a central public sector enterprise under the Department of Heavy Industries at Ranchi.

India has traditionally enjoyed cordial ties with the Czech Republic. Diversification in trade ties, high level exchanges and a shared vision of free and open market has ensured constant improvement in the bilateral relations between the two countries. In June 2022 External Affairs Minister, S Jaishankar met the Czech members of the European Parliament and deliberated on the potential of cooperation between the two countries in field of food and energy, security and digital cooperation. The Czech Republic will be taking on the European Presidency this year and deepening cooperation with India is beneficial both for bilateral relations and regional integration.

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