Bridging Continents: The State of EU–India Trade Relations

In an era of geopolitical rivalries and the erosion of old certainties, the European Union and India navigate a converging set of global challenges. A new, often unpredictable multipolar order is taking shape. Amid rising trade tensions and the unprecedented use of tariffs by the current US administration, the two "subcontinents" are rethinking their trade strategies. Against this backdrop, the EU–India trade relationship is entering a new phase of momentum, supported by growing political interest on both sides to elevate their economic ties.

Shared Crises - Parallel Strategies?

Brussels and New Delhi are increasingly aligned in their desire to enhance economic security and reduce external dependencies. Both have taken steps to hedge against the risks of over-reliance on single trading partners, albeit in different ways. In Europe, this has manifested in the European Commission's "de-risking" strategy, aimed at diversifying critical supply chains, especially in strategic sectors such as semiconductors and green technology. For its part, India has turned to "Atmanirbhar Bharat" (self-reliant India), an initiative designed to boost domestic manufacturing and reduce dependence on foreign inputs.

These parallel shifts are not merely economic; they reflect a more profound unease about the increasing overlap between commerce and coercion. The war in Ukraine, China's assertiveness, US tariffs and the volatility of global markets have all made economic resilience a strategic imperative.

Strategic Complementarities

At its best, the EU–India economic relationship is underpinned by clear strategic complementarities. The European Union is actively seeking reliable, rules-based partners to expand its trade and investment presence in the Indo-Pacific. Having already concluded FTAs with key regional economies such as South Korea, Japan, and Vietnam, a successful agreement with India would mark a significant step forward—both economically and strategically.

For its part, India requires capital, advanced technologies, and access to high-value markets to sustain its long-term growth. Mutual beneficial cooperation is possible in digital governance, clean energy, and resilient infrastructure, where both sides are well-positioned to shape emerging global standards.

As the EU seeks to reduce strategic dependencies on China, India is emerging as a credible alternative across various sectors. With a projected working-age population of around 1 billion by 2030, a rapidly growing middle class, and a steadily improving business environment, India presents attractive prospects for European investors looking for long-term growth and stability. At the same time, closer ties with the EU would help India diversify its external economic partnerships, easing its reliance on China and the United States.

The depth of the EU-India relationship and the potential for further cooperation are already reflected in our trade data: The EU was India's largest trading partner in goods in 2023, accounting for €124 billion, or 12.2% of India's total trade—surpassing both the United States (10.8%) and China (10.5%). The EU is also India's second-largest export destination (17.5% of total exports), closely behind the US (17.6%), while China ranks fourth (3.7%).

Current Challenges

In the past, both sides allowed the perfect to become the enemy of the good. After fifteen rounds of talks between Brussels and New Delhi, negotiations on the EU-India Free Trade Agreement were suspended in 2013. While talks resumed in 2021 in a new strategic context, significant obstacles unfortunately remain.

High Indian tariffs on vehicles and alcoholic beverages—ranging from 100% to 150%—remain a major concern for the EU. India, in turn, seeks improved mobility for skilled professionals and recognition as a data-secure country, while resisting EU pressure to liberalize service sectors like accountancy, architecture or legal services. Environmental regulations have added further strains, particularly the EU's Carbon Border Adjustment Mechanism (CBAM), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Deforestation regulation (EUDR). India views these measures as burdensome and potentially protectionist, with implications for key exports such as steel and cement. While these regulations face criticism within Europe as well, carving out full legal exemptions remains difficult for the EU due to internal legal constraints and policy coherence.

Outlook?

Despite past frustrations, the 2020s could be a pivotal decade for the EU and India. It is encouraging that both sides have reaffirmed their commitment to concluding a free trade agreement by the end of 2025. The recently announced UK–India trade deal should serve as added momentum, highlighting the urgency for the EU and India to bring their own negotiations to a successful conclusion.

To seize this opportunity, both partners must move beyond ideological constraints and narrow domestic interests. A free trade agreement should not be seen as an end in itself, but as a catalyst for a broader strategic partnership—one that aligns economic priorities with shared geopolitical aspirations. Achieving this will require political will, institutional creativity, and a genuine sense of mutual understanding.

As global uncertainty continues to grow, the EU and India have a unique opportunity to show that open, democratic economies can lead the way forward—together.

Michael Saxl is a Trade Policy Advisor at Austrian Federal Economic Chamber (WKO)

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.eij.news)