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Economic and commercial relations between India and Hungary

Economic  co-operation between India and Hungary has a long history. Co-operation  in this field was institutionalized in 1949 with the signing of a Rupee  Trade Agreement which operated through the negotiation of annual  protocols which fixed the products to be traded and the amounts thereof,  with the trade being canalised through government agencies. This trade  pattern continued till 1990 with the only modification being that in  1979 hard currency trade terms were introduced to replace the rupee  payment / barter system that had been in operation till then. The  inter-governmental Joint Commission was established in 1973.

Before  the change over in Hungary in 1990, India was Hungary’s major partner in  Asia both in trade and economic collaboration, even though this covered  only a small proportion of Hungary’s international economic  interaction. Hungary provided a useful first European market for several  non-traditional Indian products including Maruti cars and Mopeds.  Bilateral trade during the 1980’s remained above USD 100 million and in  some years even touched $ 200 million. The major items of export from  India before 1990 were tea, tobacco, pepper and other spices, de-oiled  cakes, finished leather and shoe uppers, iron ore and pellets, cotton  and jute goods, engineering goods, Maruti vehicles, chemicals and  chemical products. Imports from Hungary included steel and steel  products, chemicals, machine tools, pulses, peas, newsprint and  engineering goods, especially for railways and power projects. Over 60  collaborations had also been established in India by Hungarian  companies.

Sweeping reforms were undertaken at the beginning of the  1990’s in both India and Hungary with a view to integration with the  world economy which changed the rules of the game in both countries but  more dramatically in Hungary. As far as India was concerned, the  economic changes in Hungary have meant that the old commercial links  have virtually dissolved and new trading relations to replace them have  been slow to emerge due to various reasons. While deregulation and  liberalisation of the economies have thrown up fresh opportunities in  both countries for enhanced and meaningful commercial and economic  co-operation, there has not yet been any significant utilisation of  these opportunities. However, in the last few years bilateral trade has  once again increased.


INDO-HUNGARIAN TRADE
Indo-Hungarian trade , though still much below the potential, has been increasing steadily.

INSTITUTIONAL STRUCTURE OF ECONOMIC COOPERATION:

I. Trade and other agreements: A number of agreements provide the institutional framework for economic cooperation with Hungary:

  • Double Taxation Avoidance Agreement (DTAC) (signed in November, 2003)
  • Bilateral Investment Protection and Promotion Agreement (BIPA) (Nov, 2003)
  • MoU on IT Cooperation (Nov.2003)
  • Agreement on Defence Cooperation (Nov.2003)
  • Economic Cooperation Agreement (June 2005)
  • Cultural Exchange Programme (Oct 2006)
  • Agreement on the cooperation in the field of Agriculture (Jan 2008)
  • Agreement in the field of Science and Technology (Jan 2008)
  • Health Cooperation Agreement (Jan 2008)
  • Agreement between ONGC and MOL for joint exploration (January 2008)
  • Establishment of a Strategic Fund of Euro 2 million (Jan 2008)
  • MoU on Social Security Agreement (Feb 2010)
  • MoU between ITDH and FICCI on Trade and Investment Cooperation (Feb 2010)
  • Agreement on Arbitration between FICCI and HCCI (Feb 2010)
  • MoU on cooperation between HITA and FICCI in (Oct 2013)
  • MoU on Traditional Systems of Medicine, Ministry of Health India, Ministry of Human Resources Hungary (Oct 2013)

II. Joint Business Council: Set up in 1979 under an agreement between FICCI and Hungarian Chamber of Commerce and had met regularly to promote direct contact between business delegations. It last met in New Delhi in November, 2003 during Hungarian former Prime Minister, Mr. Medgyessy’s visit.
III. Joint Commission: An Inter-governmental Joint Commission was set up in 1973 and met regularly.
The 11th Session of the Indo-Hungarian Joint Commission took place on 1st October, 2003 after a gap of more than six years. The Minister for Commerce and Industry and Law and Justice Shri Arun Jaitley and Mr. Csaba Laszlo, former Hungarian Minister of Finance co-chaired the Joint Commission. Representatives from a range of sectors of interest including pharmaceuticals, IT, Construction, Cement, Power, automobile, R&D etc. participated in the meeting. From the Hungarians side, representatives from the power sector, EXIMBank, the Investment and Trade Development of Hungary, Water Management, Agriculture, pharmaceuticals, etc.,  attended. The Protocol signed after the conclusion of the JCM outlined priority areas of cooperation for the future.
The Second Session of the India-Hungary Joint Commission on Economic Cooperation (JCEC) and the meeting of the Joint Business Commission (JBC) were held at Budapest during February 1-2 2010. The JCEC delegation was lead by H.E. Mr. Anand Sharma, Union Minister of Commerce and Industry. Shri Anand Sharma said that greater efforts will be made to step up trade and investment flows between India and Hungary and highlighted new sectors for cooperation like energy, medical equipment, agro-processing, dairy plants, water management, waste management and waste water purification. Both sides agreed to increase the level of trade to USD 1 billion by 2012. An agreement for oil exploration has already been signed between MOL, the Hungarian Oil Company, and ONGC of India in which MOL is a 35% partner. It was agreed that the two countries will strengthen cooperation in the IT sector and an MoU detailing the areas of cooperation will be entered into between the Hungarian association of IT companies and Electronics & Computer Software Export Promotion Council (ESC) India. The India-Hungary S&T fund of Euro 2 million per annum for the promotion of joint research projects will soon be internationalized and bilateral S&T projects would be selected for funding.
A Social Security Agreement was signed between the two countries on the sidelines of the JCEC, which would address the issues on social security tax particularly in the case of IT sector. An agreement on Trade and Investment cooperation was also signed between Federation of Indian Chambers of Commerce and Industry (FICCI) and ITD Hungary. The chambers of the two countries also signed an agreement on arbitration. Subsequently during the visit of PM Orban to India in October 2013 an MoU on coorperation between FICCI and HITA, (the successor of ITD Hungary) was  signed. During the visit the signing of an MoU on Traditional Systems of Medicine between the Indian Ministry of Health and the Hungarian Ministry of Human Resources also took place.

LATEST ECONOMIC EVENTS:

Recent years have seen the rapid upgradation of India-Hungary cooperation in diverse sectors. Today our bilateral cooperation extends not merely to commercial and investment partnerships but also to the fields of agriculture, defence industry, health including Ayurveda, oil exploration, science and technology, and educational and cultural exchanges. This cooperation is set to strengthen even further in the future.