India–EU FTA and Strategic Realignment | 29 Jan 2026

In a world marked by fractured supply chains, sanctions, politics, and sharpening great-power rivalry, India and the European Union have taken a decisive geopolitical step by signing the India–EU Free Trade Agreement. With bilateral trade at $136 billion, the EU contributing 16% of India’s FDI, and the FTA expected to unlock $75 billion in additional exports, economic integration is now reinforcing strategic alignment. For Europe, the agreement enables diversification away from China and the US and  for India, it secures access to the world’s largest single market. Together, the two partners are positioning themselves as anchors of stability in an emerging multipolar, rules-based global order. 

How India-EU Ties have Evolved Over Time?  

• Phase I: Normative Engagement (1990s–2004) 
  • Post–Cold War reorientation led to economic and political engagement driven by trade, development assistance, and shared democratic values, culminating in the Strategic Partnership in 2004. 
• Phase II: Institutional Optimism, Limited Convergence (2005–2013) 
  • The Joint Action Plan (2005) and Broad-based Trade and Investment Agreement (BTIA) talks (2007) expanded dialogue architecture, but progress stalled due to Eurozone crises, regulatory divergence, and lack of political push,revealing a gap between ambition and delivery. 
• Phase III: Strategic Drift amid Global Uncertainty (2014–2019) 
  • Despite growing trade, ties remained under-leveraged as Europe turned inward and India diversified partnerships; the relationship remained economically transactional and geopolitically underdeveloped. 
• Phase IV: Strategic Recalibration (2020–2024) 
  • Covid-19, supply-chain shocks, and China’s assertiveness triggered convergence on resilience, technology, and the Indo-Pacific, leading to revival of trade talks and the Trade and Technology Council (2022). 
    • Both sides began reassessing the FTA not merely as a commercial instrument but as a tool for resilience, diversification, and strategic autonomy. 
• Phase V: Strategic Consolidation (2025–present) 
  • The signing of the India–EU FTA, security and defence partnership, and mobility frameworks mark a shift from sectoral cooperation to comprehensive strategic alignment, positioning India and the EU as co-architects of a stable multipolar order. 

What are the Other Areas of Convergence in India-EU Relations? 

• Strategic Autonomy & Multipolar World Order: India and the EU converge on resisting bloc politics and preserving strategic autonomy amid US–China rivalry.  
  • Both prefer issue-based coalitions, sovereignty, and flexibility over alliance entanglements.  
    • This alignment positions them as stabilising middle powers shaping a multipolar order rather than followers of great-power binaries. 
  • The Joint India-European Union Comprehensive Strategic Agenda reaffirmed commitment to prosperity and sustainability. EU leaders were chief guests at India’s 77^th Republic Day, signalling political recalibration. 
• Defence, Maritime Security & Indo-Pacific Stability: Security convergence has deepened as both face disruptions to sea lanes, cyber threats, and grey-zone coercion in the Indo-Pacific.  
  • India brings regional presence and naval capability, while the EU contributes capacity-building and maritime domain awareness. Security cooperation now complements economic engagement. 
  • The Security and Defence Partnership (SDP) expands cooperation in maritime security, cyber-defence, and counter-terrorism and joint naval exercises. 
• Supply Chain Resilience & De-Risking from China: Both India and the EU seek to reduce overdependence on concentrated manufacturing hubs, especially China, without abrupt decoupling.  
  • India offers scale, demographics, and manufacturing potential, while the EU provides capital, technology, and standards. This convergence is driven by risk management rather than ideology. 
  • EU leaders have framed India as a trusted partner for diversification. For instance, EU firms account for 16% of total FDI into India with over 6,000 companies operating locally. 
    • European Commission President Ursula von der Leyen has strongly endorsed the sentiment that a growing India benefits the world. Specifically, during the finalization of a major EU-India trade deal, she stated: "When India succeeds, the world is more stable, more prosperous and more secure, and we all benefit". 
• Technology Governance & Trusted Digital Ecosystems: India and the EU converge on the need for democratic governance of technology—balancing innovation with regulation.  
  • Unlike the US’s market-led approach or China’s state-centric model, both favour rules-based digital ecosystems. Cooperation spans AI, semiconductors, cyber norms, and digital public infrastructure. 
  • The India–EU Trade and Technology Council (2022) institutionalised cooperation on trusted tech, supply chains, and green technologies; multiple TTC working groups are now operational. 
• Multilateralism & Global Governance Reform: India and the EU converge in defending multilateral institutions at a time of fragmentation, sanctions politics, and rule erosion. Both see reformed multilateralism—not unilateralism—as essential for global stability. India’s rise and EU’s normative weight are increasingly complementary. 
  Data/Example:  
  • India and EU coordinate positions in forums like G20, WTO reform debates, and climate negotiations.

What are the Key Areas of Divergence in India-EU Relations? 

• "Green Protectionism"-The CBAM Deadlock: The primary economic friction is the EU's Carbon Border Adjustment Mechanism (CBAM), which India views as a discriminatory "green tax" disguised as climate action.  
  • India argues this unilateral levy penalizes its developing industrial base by ignoring "Common But Differentiated Responsibilities" (CBDR), effectively neutralizing the tariff benefits gained under the new FTA by adding a 20-35% cost layer to exports. 
  • While the recent India–EU FTA signals progress through an MFN clause on CBAM-related flexibilities, its practical effectiveness in shielding Indian exports remains uncertain. 
• Geopolitical Dissonance- The "Russia-Ukraine" Litmus Test: A sharp strategic divide persists over the Russia-Ukraine conflict, where the EU demands alignment on sanctions as a "values-based" prerequisite, while India maintains "Strategic Autonomy."  
  • The EU views India's purchase of Russian oil as indirectly funding the war against Europe, whereas India frames it as a non-negotiable energy security imperative for its 1.4 billion population, creating a permanent diplomatic irritant. 
  • India was the third highest buyer of Russian fossil fuels, importing a total of €2.3 billion of Russian hydrocarbons in December 2025 (CREA), while the EU urged tighter sanctions. 
    • Further, India abstained on key UN resolutions criticizing Russia, diverging from the EU's unified block vote. 
• Digital Sovereignty-GDPR vs. DPDP Act Alignment: While the EU considers its General Data Protection Regulation the "gold standard" for data adequacy,  India’s Digital Personal Data Protection (DPDP) Act, 2023, prioritizes government access for national security, creating a fundamental "adequacy gap."  
  • The EU is hesitant to grant India "Data Secure" status, crucial for high-value IT outsourcing, citing the lack of an independent regulator (India's Data Protection Board is government-appointed) and broad state surveillance exemptions. 
  • EU-India data cooperation is currently hindered by concerns over the broad exemptions granted to government agencies under Section 17 of India’s DPDP Act, 2023. 
    • This forces Indian IT firms to use costly Standard Contractual Clauses (SCCs), adding to their compliance costs for EU clients compared to the Philippines or Vietnam. 
• Mobility Asymmetry- "Fortress Europe" vs. "Talent Export": While the EU seeks "circular migration" (temporary entry) strictly to fill its aging workforce gaps, India demands permanent and easier "Mode 4" access (movement of professionals) for its IT and healthcare workers.  
  • The divergence lies in the EU’s security-centric approach prioritizing the return of "illegal migrants" versus India’s economic approach, which views restrictive visa regimes and non-recognition of Indian degrees as a primary trade barrier. 
  • While the EU sets no official cap on Blue Cards, the 2026 mobility pact guarantees a minimum of 35,000 graduate permits against an annual target of 100,000 multi-year work visas for Indians.  
    • This guaranteed floor remains significantly below India’s vast supply of millions of graduates, creating a competitive bottleneck for those seeking formal entry. 
• WTO Subsidy Wars- "Public Stockholding" Conflict: At the WTO, the EU alongside other developed nations like the US, aggressively challenges India’s Minimum Support Price (MSP) and food grain procurement as "trade-distorting" subsidies that breach the 10% limit, while simultaneously shielding its own farmers with massive "Green Box" (non-trade distorting) subsidies.  
  • For instance, at recent preparatory meetings for the 14th WTO Ministerial Conference (MC14) to be held in March 2026, the EU has proposed introducing “responsible consensus”, diluting the Most-Favoured-Nation (MFN) principle, restricting Special and Differential Treatment (S&DT) for developing countries, and deferring the restoration of a robust dispute settlement mechanism until core WTO reforms are completed. 
    • It is an approach that conflicts with India’s stance, which strongly supports the revival of a fair and effective multilateral dispute settlement system to safeguard developing-country interests. 

What Measures are Needed to Enhance India-EU Cooperation? 

• Establishing a "Green Equivalence" Framework for CBAM: To defuse the carbon tax tension, both sides should negotiate a "Sovereign Carbon Credit Reciprocity" agreement where India’s domestic "Carbon Credit Trading Scheme" (CCTS)" is technically harmonized with the EU’s ETS.  
  • By validating Indian carbon certificates as "equivalent offsets" at the source, exporters can pay the carbon price domestically rather than to Brussels, ensuring the revenue remains within India for green transition funding while satisfying the EU’s requirement for a level playing field. 
• Creating "GDPR-Aligned Data Enclaves" (Regulatory Sandboxes): To bypass the deadlock on national data adequacy, India should designate specific Special Economic Zones (like GIFT City) as "Data Adequacy Islands" that operate under stricter, GDPR-equivalent privacy norms independent of broader state surveillance laws.  
  • This "zonal adequacy" approach allows high-value data processing for EU clients to continue seamlessly within these ring-fenced enclaves, decoupling commercial data flow needs from the complex national security debates surrounding the DPDP Act. 
• Operationalizing "Third-Market Co-Creation" in the Global South: To dilute the bilateral geopolitical fixation on Russia, the partnership should pivot to a "Joint Infrastructure Platform" for Africa and the Indo-Pacific, combining EU capital (Global Gateway) with India’s cost-effective execution capabilities.  
  • This "Strategic De-hyphenation" focuses energy on shared constructive goals like building resilient power grids in Kenya or digital payment systems in Vietnam creating a functional success track that insulates the broader relationship from specific diplomatic disagreements. 
• A "Critical Raw Materials Club" with Value-Addition Guarantees: Rather than the EU simply extracting resources, a "Co-dependency Compact" should be signed where the EU transfers advanced metallurgical processing technology to India in exchange for secured lithium or rare earth supplies.  
  • This moves the relationship beyond a "buyer-seller" dynamic to a "joint-processor" alliance, ensuring India captures the high-value intermediate manufacturing stage while the EU secures a diversified supply chain free from Chinese monopoly. 
• Establishing "India-EU Innovation Hubs" for Critical Technologies: As outlined in the Joint India-EU Comprehensive Strategic Agenda, both sides should operationalize dedicated "Innovation Hubs" to facilitate the co-development of critical and emerging technologies like 6G, Quantum Computing, and Advanced Semiconductors.  
  • This measure moves beyond simple "technology transfer" to a "co-creation" model where Indian design strengths (in AI and chip prototyping) are integrated with European research infrastructure, effectively building a democratic tech supply chain that serves as a resilient alternative to monopolistic global actors.

Conclusion:

The India–EU partnership is evolving from episodic engagement to strategic convergence, anchored in multipolarity, strategic autonomy, and rules-based order. The FTA acts as a catalyst, but the relationship now spans security, technology, climate governance, and human capital. Managing divergences through dialogue rather than coercion will be critical. Together, India and the EU can emerge as pillars of stability in a fractured global system.