What the collapse of the Dutch government means for India

Rutte failed to hash out an agreement with his coalition partners.

The Mark Rutte-led Dutch government collapsed this weekend over differences among coalition partners on the immigration issue, the most polarising factor among political parties and the people in Europe in recent years.

Rutte, leader of the People’s Party for Freedom and Democracy, has been in power with different coalitions since October 2010, and is currently one of the longest serving leaders in Europe.

On Saturday, Rutte failed to hash out an agreement with his coalition partners. He resigned along with his cabinet and informed the king. His departure has raised questions on political stability in the Netherlands, and how it will affect India’s growing relations with the country. Netherlands is India’s third largest export destination after the US and the UAE.

Dutch investors and Indians have both invested in a variety of sectors in each other’s countries.

The immigration issue

“It is no secret that the coalition partners have very different views on migration policy,” Rutte told newsmen in the Hague. “And today, unfortunately, we have to draw the conclusion that those differences are irreconcilable,” he added. Rutte had tried for months to find a solution and convince his coalition partners.

With a population of 18 million, the Netherlands has struggled to come out with an effective policy to reduce the flow of immigrants into the country. There were proposals for two categories of asylum. A temporary one for people fleeing conflict, and a permanent one for those escaping prosecution. But the idea of reducing the number of family members who will be allowed to join asylum seekers led to serious differences.

According to Dutch statistics, about 4,00,000 people migrated to the Netherlands in 2022, either seeking asylum, or to work, study, join their families, etc.

The Dutch Prime Minister tried to promote the European Union’s efforts to slow down migration to the 27-nation bloc.

He travelled to Tunisia with his Italian counterpart and the president of the EU’s executive commission last month to offer a billion Euros in financial aid to stem migration from Tunisian shores to Europe.

The last time that Rutte and his cabinet resigned from government was when tax authorities wrongfully accused thousands of families of fraud on the basis of ethnicity in 2021. Rutte resigned accepting responsibility for the wrongful accusations. But he weathered the crisis and soon became Prime Minister after nine months.

China factor

China is a major trade partner of the Netherlands with bilateral trade at over $117 billion. But the Dutch government has become uneasy about China as an ethical and reliable partner. MIVD, the Dutch intelligence agency, said in a recent report that “China is the biggest threat to Dutch economic security.” Rutte has also expressed scepticism over China’s rise. “I don’t see how this will be the Chinese century, ” he said.

Political tensions between the two sides have affected trade ties, and the Netherlands has joined the US in limiting the export of chip technology to China. The Netherlands’ ASML is the world’s leading company for making chip machines.

The Dutch government suspects a former China-based employee stole secret information from ASML. The charges have not been proved and many have raised doubts about the accusation.

The India option

In recent years the Dutch government has started looking at India as a more reliable partner and investment destination.

There have been regular high-level visits between the two countries that has led Prime Minister Narendra Modi, the Indian President, and the foreign minister to visit the Netherlands.

These were reciprocated with visits by Rutte and other senior members of his government, as well as the Dutch royal couple, to India.

Trade between the two sides has reached $18.52 billion and Holland has invested over $43 billion in India in the past two decades.

There are over 300 Dutch companies in India, including well-known brands like Philips, Signify, Akzo Nobel, DSM, Heineken, KLM, and others. They are present across India in a variety of sectors, from sustainable energy, to water and waste management, to smart cities, healthcare and medicines, to ports, shipping, and inland waterways, to agriculture, and more.

Nearly 300 Indian companies, including IT majors like TCS, HCL, Wipro, Infosys, Tech Mahindra, and important players from other sectors such as Sun Pharmaceuticals, Tata Steel, Solis, and LT Foods are present in the Netherlands.

The upswing in the bilateral ties promises cooperation and partnership in a number of other important areas, especially in hi-tech and emerging technologies as the Dutch leadership consolidates options beyond China.

Fresh elections are likely to be held in the Netherlands by October this year.

Rutte, who played a key role in deepening ties with India, could still manage to return as Prime Minister in the next dispensation. But even if a new leadership comes up, it is highly unlikely that it will drop India from its priority list.