Recalibrating India-EU Partnership | 20 Sep 2025

India–EU relations have entered a new phase, with Brussels unveiling a strategy that recognises New Delhi as a key partner in trade, technology, and security. While opportunities in a Free Trade Agreement (FTA) and innovation partnerships are promising, challenges such as differing positions on Russia and structural trade imbalances demand careful recalibration and a forward-looking approach.

What are the Key Areas of Convergence of India and the European Union? 

• Economic and Trade Relations: In 2023, India was the ninth largest trading partner for EU’s exports of goods (1.89%) and also the ninth largest partner for EU’s imports of goods (2.58%). India’s percentage share in EU’s global total bilateral trade (2.19%) stood at 2.19%.
  • India-EU Bilateral Trade in Services in 2022 stood at €50.737bn (comprising Indian exports (€26.856bn) and imports (€23.882bn)), registering the highest ever trade in services with an increase of 23.7% compared to bilateral trade of €41.01bn in 2021.
  • Foreign direct investment (FDI) from the EU is substantial, supporting India’s industrial growth, job creation, and technology transfer.
  • Free Trade Agreement (FTA) negotiations resumed in 2021 after a long deadlock, focusing on tariff reductions, investment protection, and regulatory alignment.
  • The EU seeks greater market access in India, while India aims for fewer trade barriers to boost exports and investments.
• Security and Defense Cooperation: The EU is expanding maritime cooperation with India, deploying a liaison officer at the Indian Navy’s Information Fusion Centre in Gurugram.
  • Both sides are exploring greater defense technology collaboration, with discussions on joint military exercises and counterterrorism strategies.
  • The EU's Enhancing Security Cooperation in and with Asia (ESIWA) initiative boosts security ties with Asia, including India, to safeguard key Indian Ocean sea lanes.
  • Strengthening security ties in the Indo-Pacific aligns with India’s interests in countering China’s expansionism and enhances regional stability through European engagement.
• Technology, Digital, and Infrastructure Cooperation: The India-EU Trade and Technology Council (TTC) focuses on semiconductors, Artificial intelligence (AI), and clean energy technologies.
  • The India-Middle East-Europe Economic Corridor (IMEC) aims to enhance global trade routes and energy security.
  • EU-India cooperation in digital payments and fintech is expanding, with discussions on cross-border digital transactions.
  • Strengthening technology ties ensures India’s leadership in innovation, promotes digital transformation, and reduces reliance on China-led supply chains.
• Strategic Autonomy & Multi-Alignment: US’ potential deal-making with Russia and China, along with its 50% tariff on 55% of India’s $87 billion exports in 2025, underscores the urgency for India to diversify economic and strategic ties, making the stable EU partnership vital for strategic autonomy and multi-alignment.
  • The EU is a stable and predictable partner, offering economic and technological collaboration without security dependencies.
  • The EU's strategic autonomy aims to reduce dependence on the US, aligning with India's multi-alignment by ensuring economic, technological, and strategic cooperation without security entanglements.
• Global Governance & Geopolitical Realignments: The EU is reducing economic reliance on China, aligning with India’s strategy of trade diversification.
  • As transatlantic tensions rise, the EU seeks independent foreign policy engagements, increasing India’s diplomatic leverage.
  • Both partners advocate for a rules-based order in multilateral institutions, including the G20, WTO, and UN Security Council.

What Structural and Strategic Challenges Continue to Constrain India-EU Relations?

• Geopolitical Differences: The EU envisions a comprehensive partnership, including trade, security, and human rights cooperation, while India prioritizes strategic autonomy and avoids deep alliances.
  • India's neutral stance on Russia's invasion of Ukraine contrasts with the European Union's approach, which has imposed sanctions against Russia and faced difficult relations due to Russia's attacks on Ukraine and assaults on democracy.
    • This creates a trust deficit and complicates policy-level coordination between India and the EU.
  • India views China as a strategic competitor due to border disputes and economic rivalry, while Europe continues to have significant trade with China despite concerns over its human rights and economic practices.  
    • This contrast hinders a unified approach on Indo-Pacific policies.
  • India’s multi-alignment approach with Russia, the U.S., and Europe leads to occasional policy misalignments.
• Economic and Trade Barriers: FTA negotiations between India and the EU, initiated in 2007, have faced delays due to disagreements. 
  • Stricter EU intellectual property rights (IPR) norms conflict with India's focus on affordable generic pharmaceuticals. 
  • Additionally, the EU's insistence on stringent labor and environmental standards like Carbon Border Adjustment Mechanism poses challenges for India's domestic industries.
    • Although India's CBAM-exposed exports to the EU account for only 0.2% of its GDP, the iron and steel sector constitutes 90% of these exports, exposing significant vulnerability.
• Defence and Strategic Divergences: India’s dependence on Russian defence systems limits deeper collaboration with Europe on advanced military technology.
  • Despite projects like Rafale jets and submarine collaborations with France and C-295 Aircraft with Spain, EU-India defense ties lag behind those with the US or Russia. 
  • The lack of a dedicated strategic dialogue and the EU's restrictive approach to knowledge sharing further hinder cooperation, while Russia supports joint manufacturing with India.
• Technology and Innovation Gaps: India prioritizes affordable technology, while Europe focuses on sustainability and advanced manufacturing. 
  • But China leads in new areas like Artificial intelligence and Quantum computing Quantum Computing, and without a  joint India-EU plan, both sides struggle to keep up.
• Investment Barriers & Regulatory Hurdles: India’s trade regulations remain restrictive, with technical barriers to trade (TBT) and sanitary & phytosanitary (SPS) measures affecting European businesses.
  • European investors seek a more predictable policy environment, particularly in investment protection agreements.
• Data Privacy Regulations: EU’s strict data laws make digital exports from India costly and complex. 
  • India lacks EU data adequacy status, restricting seamless data transfers, while small IT firms struggle with high compliance costs, limiting competitiveness.
    • The European Data Protection Supervisor (EDPS) refused a request by the European Investment Bank (EIB) to transfer personal data to India, citing a lack of evidence that India offers a data protection level "essentially equivalent" to the EU's GDPR.
  • Also, Indian firms require expensive compliance mechanisms to access the EU market.

How can India Further Strengthen and Deepen Its Relations with the European Union?

• Fast-Track the FTA & Address Trade Barriers: Prioritize resolving tariff disputes, particularly in automotive, pharmaceuticals, and digital trade.
  • Accelerating FTA talks will strengthen supply chains, reduce trade barriers, and create alternative economic linkages.
  • Boosting high-tech exports and facilitating greater European investment in India’s manufacturing sector will drive economic growth.
  • Beyond an FTA, India and the EU can explore joint ventures in sectors like pharmaceuticals, technology, renewable energy, and critical raw materials. 
    • qAdditionally, similar to the India- European Free Trade Association (EFTA) Trade and Economic Partnership Agreement (TEPA), the EU could sign a similar agreement with India to promote free trade and economic integration.
• Negotiating a Data-Sharing Framework: India should negotiate an EU-U.S.-style Privacy Shield to enable smooth cross-border data flows. 
  • A mutual recognition framework can reduce compliance costs for Indian firms, while domestic data compliance bodies will help them meet EU privacy norms efficiently. 
  • Strengthening cybersecurity laws will enhance India’s credibility in global digital trade.
• Strengthen Defense & Security Ties: Expand joint naval exercises, cyber defense partnerships, and intelligence-sharing mechanisms.
  • Expand co-development of defense equipment with France. Align India’s Indo-Pacific strategy with European defense priorities to counter China’s regional assertiveness.
  • India's defense partnerships with the US, Russia and Quad membership can be complemented by the EU’s investment in India’s defense sector and advanced technologies for regional security.
• Develop Alternative Supply Chains: Expand semiconductor and AI collaborations under the India-EU Trade and Technology Council (TTC).
  • Strengthening the IMEC and INSTC will create a new trade and energy route that bypasses China.
• Enhance Digital & Green Technology Partnerships: Increase cooperation in renewable energy, fintech, and data privacy regulations.
  • The EU-India TTC presents an opportunity to align technology agendas, similar to the US-India initiative on Critical and Emerging Technology, fostering high-level collaboration to drive innovation and advancements in key sectors.
  • Expanding cooperation in green hydrogen, electric vehicles, and carbon-neutral technologies will benefit both economies.
    • Align India’s data protection policies with the EU’s standards to facilitate digital trade expansion.
• Reform Domestic Trade & Investment Policies: India must simplify regulatory frameworks, enhance infrastructure, and ensure policy stability to attract European investments.
  • Strengthening intellectual property rights (IPR) protections and ensuring ease of doing business will encourage European tech firms to establish R&D hubs in India.
• Position India as a Global Diplomatic Balancer: With the U.S.-Europe relations under strain, India can act as a bridge between major powers, fostering a balanced global order.
  • Engaging with the EU on multilateral platforms like the G20 and UN Security Council reforms will elevate India’s global influence.
  • Unity against the rising authoritarianism as a threat to democracies can unite India, Europe, and the US.
    • This alignment can drive collaborative efforts to address global challenges across the Atlantic and Indo-Pacific through initiatives like the Democracy Summits.

Conclusion

The India-EU partnership stands at a transformative moment, poised to significantly influence global economic and strategic landscapes. As Shishir Priyadarshi, former WTO Director, notes, "This new strategic agenda provides a powerful framework for two of the world's largest democratic and economic blocs to collaborate for mutual prosperity and global stability." Strengthening this alliance will be crucial in enhancing economic resilience, technological innovation, and security cooperation, thereby reinforcing India's influential role in a multipolar world.