Country Profile: Italy

• The Italian economy grew at a CAGR of 0.25% over the past fourteen years, which is less than the average in EU.
• Italy is the third largest economy in EU and overall eight largest economy by nominal prices and 12th by purchasing power parity in terms of GDP.
• Italy’s exports and imports grew at CAGRs of 1.5% and 2% respectively from 2014 to 2018. Major exporting partners are Germany, France, USA, Spain and UK.
• India-Italy bilateral trade in 2018 stood at US$ 10.8 billion, compared to US$ 10 billion in 2017.

Italy is the third largest economy in EU and overall the eighth largest economy by nominal prices and 12^th by purchasing power parity in terms of GDP. As a major advanced economy, Italy is a founding member of the European Union (EU), the Eurozone, the OECD, the G7 and the G20. It has closest trade ties with other countries of the EU, with whom it conducts about 60% of its total trade.

Italy is among the largest manufacturers and exporters of a variety of products including clothing, machinery, pharmaceuticals, vehicles, furniture, food and robots. The country is also well known for its influential and innovative business ecosystem, an industrious and competitive agricultural sector and high-quality and premium offerings in automobiles, naval, industrial, appliance and fashion design.

Italy is the largest hub for luxury goods in Europe and the third luxury hub globally. It owns the world’s third-largest gold reserve, and is also the third largest net contributor to the EU’s budget. Furthermore, it’s among the world’s largest in terms of quantum of private wealth.

Source: World Bank

The Italian economy grew at a CAGR of 0.25% in the past fourteen years, which is less than the average in EU. During the current time period, The economy has been broadly stagnant for the last five quarters. In the second quarter, GDP was flat from the previous three months and down 0.1% on a year-on-year basis. Italy’s new government expects the economy to expand by only about 0.4% next year after eking out 0.1% growth this year.

Macroeconomic indicators of Italy

Source: Compiled from various sources

The economy is anticipated to remain sluggish this year, bogged down by both a weak domestic economy and challenging external environment. Uncertainty, weak business environment and slow credit growth will all hamper investment, while risk of financial turbulence remains elevated given the political situation and the country’s precarious fiscal position.

Export and import partners of Italy, in US$ billion

Source: ITC Trade Map, 2019

Trade basket of Italy

Source: ITC Trade Map, 2019

Source: ITC Trade Map, 2019s

Italy’s exports and imports burgeoned by CAGRs of 1.5% and 2% respectively from 2014 to 2018. Major exporting partners of Italy are Germany, France, USA, Spain and UK, while major importing partners are Germany, France, China, Netherlands and Spain.

India-Italy trade relations

India-Italy bilateral trade in 2018 stood at US$ 10.8 billion, as compared to US$ 10 billion in 2017. India’s exports to Italy increased by 3.3% in the last five years and imports increased by 4.7% for the same period. India’s exports and imports to Italy are each roughly half of the total bilateral trade. Italy accounted for 2.3% of India’s total investment in the EU.

Source: ITC Trade Map

India’s major exports to Italy include flat rolled iron products, unwrought aluminium, accessories of automobiles, polyacetals, coffee, automobiles, footwear, heterocyclic compounds, synthetic organic colouring etc. Major Indian imports from Italy includes light vessels and fire floats, accessories for tractors, machines and mechanical appliances, transmission shafts, dishwashing machines, pumps for liquids, printing machinery etc.

Top product categories in terms of export potential are readymade garments, yarns, leather products, chemicals and dyes, iron ore, marine products, agricultural and engineering items, gems and jewellery, carpets, coffee and pharmaceuticals. Italy can look forward to enhance exports of chemicals, pharmaceuticals, metals, plastics, apart from transport, food processing, energy and telecommunications to India.

Italian companies are actively participating in the Make in India campaign by offering collaborations in areas such as food processing, infrastructure, heavy machinery, renewable energy, advanced technology, as well as information and communication technology. In all, approximate 800 Italian companies are already active in India.

Both economies are looking to enhance cooperation in energy, railroad safety, bilateral investment, joint training programs for foreign services, cultural exchange and diplomatic ties. India and Italy are jointly working in the areas of infrastructure, tourism, railways, food processing, renewable energy, information technology and agriculture.