India-Spain Relations: Strengthening Bilateral Ties and Emerging Opportunities for Business

Posted On - 11 November, 2024 • By - Mona Rawat

Introduction

India and Spain, two vibrant democracies with a rich history of cultural and political ties, have in recent years deepened their partnership across multiple spheres, including defence, trade, technology, and cultural exchange. This relationship, built on shared values of democracy, rule of law, and a commitment to a fair global order, recently gained momentum with the visit of Spanish Prime Minister Pedro Sanchez to India. This diplomatic visit not only underscored the long-standing rapport between the two nations but also signalled the beginning of new strategic alliances in sectors crucial to both economies.

Historically, Spain recognized India’s independence in 1956, but their partnership truly gained traction in the early 2000s, evolving to include robust economic, technological, and cultural ties. In recent years, as India has opened its markets and emphasized initiatives like “Make in India” and renewable energy expansion, Spain has emerged as a key partner. Spain’s extensive expertise in infrastructure, high-speed rail, renewable energy, and defence has aligned well with India’s development objectives, offering lucrative avenues for collaboration. This new phase of cooperation promises not only to bolster bilateral relations but also to create pathways for sustainable growth and technological advancement in both nations.

Historical Background of India-Spain Relations

The diplomatic relationship between India and Spain, established in 1956, has gradually grown into a strong partnership across sectors, including trade, defence, culture, and education. Prime Minister Narendra Modi’s 2017 visit to Spain set the stage for heightened engagement, with both nations seeking to expand ties in fields of mutual interest. Building on this foundation, Prime Minister Sanchez’s visit in October 2024 has invigorated India-Spain relations, with agreements that promise transformative impacts for both countries.

Key Outcomes of Prime Minister Sanchez’s Visit to India

Prime Minister Sanchez’s recent visit to India in October, 2024, has reinforced India-Spain ties, especially in the areas of defence, economic collaboration, cultural exchange, and sustainability. Sanchez was joined by a delegation that included Spain’s Minister of Transport and Industry, signalling the country’s commitment to strengthening its strategic partnership with India. The inauguration of the C-295 aircraft manufacturing facility in Vadodara, Gujarat, marked a landmark achievement, symbolizing Spain’s alignment with India’s ‘Make in India’ and ‘Atmanirbhar Bharat’ (self-reliance) initiatives.

1. Deepening Defence Cooperation

Defence collaboration has emerged as a primary focus, with both nations agreeing to enhance defence industrial partnerships. The establishment of the C-295 plant, a joint effort between Spain’s Airbus and India’s Tata Advanced Systems Ltd., is a groundbreaking development in India’s defence manufacturing. This aligns with India’s Defence Acquisition Procedure (DAP) 2020, a policy aimed at increasing domestic defence production capabilities, promoting indigenization, and reducing reliance on imports. This project underscores the importance of collaborative defence technologies and is a significant milestone in India’s path towards self-reliance in defence.

Spain’s defence industry has much to offer, particularly in areas like cyber security and maritime surveillance, areas where India is keen to build capabilities. For Spanish companies, India’s defence sector provides an attractive market, benefiting from India’s push for increased defence modernization and diversification.

2. Economic Cooperation and Trade Opportunities

Economic ties between India and Spain have strengthened considerably, with approximately 230 Spanish companies now operating in India. Spain’s expertise in sectors like renewable energy, food processing, infrastructure, and automotive technology complements India’s developmental priorities. The India-Spain CEOs Forum and Business Summit held in Mumbai during Sanchez’s visit highlighted the mutual trade and investment potential.

The launch of a Fast Track Mechanism to resolve business and investment challenges is a significant development for enhancing trade ease, encouraging Spanish businesses to expand their operations in India.

  1. Bilateral Trade and Investment Agreements: India and Spain are progressing towards comprehensive trade and investment agreements, with the India-EU Free Trade Agreement (FTA) under negotiation. Such agreements will lower trade barriers, improve legal protections, and provide dispute-resolution mechanisms that are critical for businesses.
  2. Renewable Energy Regulations: India’s renewable energy policies offer attractive tax benefits, subsidies, and incentives. Spain’s expertise in clean energy aligns with India’s goals for solar and wind energy expansion, opening doors for Spanish firms to explore joint projects, especially within the framework of India’s National Green Hydrogen Mission.
  3. Corporate Compliance and Tax Laws: Spanish firms investing in India are subject to India’s corporate and tax regulations, such as the Goods and Services Tax (GST), Companies Act, and Foreign Exchange Management Act (FEMA). The Government of India’s efforts in improving the ‘Ease of Doing Business’ simplify these requirements, but companies must still ensure compliance to operate seamlessly.
  4. Infrastructure and Transport Agreements: The recent MoU signed on rail transport infrastructure, including the potential for Spanish technology in high-speed rail, aligns with India’s National Infrastructure Pipeline. This MoU will reduce regulatory hurdles and facilitate Spain’s entry into India’s transportation infrastructure projects.

3. Cultural Exchange and Education

Cultural and educational ties remain a vital aspect of India-Spain relations. The India-Spain Year of Culture, Tourism, and AI, set for 2026, aims to foster mutual appreciation of each nation’s cultural heritage through art, film, literature, and technology. A recent Cultural Exchange Program agreement formalizes mutual participation in cultural activities, deepening people-to-people connections.

India’s National Education Policy (NEP) 2020 emphasizes collaboration with international educational institutions, opening avenues for Spanish universities to partner with Indian counterparts. Spanish universities have shown interest in offering joint programs, research initiatives, and academic exchanges, which will enhance educational collaboration.

4. Technology and Artificial Intelligence (AI) Partnership

As part of the G20 New Delhi Leaders Declaration, India and Spain have pledged to advance responsible AI, including through joint AI projects in governance, healthcare, and education. The India-Spain Year of Culture, Tourism, and AI will further focus on AI’s role in these areas. Spanish technology companies can benefit from incentives under India’s Startup India initiative, collaborating on AI-driven solutions for various sectors.

5. Multilateralism and Global Governance

India and Spain share common goals in multilateralism, advocating for reforms in institutions like the United Nations. Spain’s invitation for India to join the International Drought Resilience Alliance (IDRA) signifies mutual commitment towards sustainable development and climate resilience. Both nations condemned terrorism and committed to cooperation on counter-terrorism initiatives.

In the geopolitical realm, Spain’s support for UNCLOS 1982 in the Indo-Pacific demonstrates its interest in regional stability, where Spain may further align with India’s Indo-Pacific Oceans Initiative (IPOI) to enhance maritime cooperation. Both nations have agreed to share intelligence to counter violent extremism and terrorism, marking a new level of trust in security collaboration.

6. Opportunities and Challenges for Businesses

With India and Spain setting an agenda for strategic economic collaboration, businesses in both countries have numerous opportunities to explore. Key sectors of interest include:

  • Defence Manufacturing: The indigenization of defence equipment through initiatives like the C-295 plant aligns with India’s self-reliance goals, offering Spanish firms new opportunities in joint manufacturing and technology sharing.
  • Renewable Energy: Spanish firms with expertise in solar, wind, and hydroelectric power can capitalize on India’s incentives for renewable energy projects, supported by favourable regulations under India’s Renewable Energy Development Agency.
  • Smart Infrastructure and Transportation: Agreements on transportation infrastructure and high-speed rail development open a market for Spanish expertise in smart urban planning, logistics, and rail technology.

Conclusion: A Pathway to Strategic Partnership

The recent visit by Spain’s Prime Minister Pedro Sanchez has marked the beginning of a new chapter in India-Spain relations. From defence and economic cooperation to cultural exchange and technological advancements, the bilateral partnership is poised to yield substantial benefits for both nations. Spanish businesses now have clear pathways to expand in India’s dynamic economy, supported by strong legal frameworks, emerging trade agreements, and shared commitments to sustainability.

India’s defence modernization, digital infrastructure projects, and renewable energy targets provide lucrative opportunities for Spanish companies, while Indian companies can access Spain’s European market. As both countries prepare to celebrate the India-Spain Year of Culture, Tourism, and AI in 2026, their strengthened partnership underscores the importance of strategic collaboration in a rapidly changing global landscape.

King Stubb & Kasiva,
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