Hedging the US, balancing China: Why India-EU FTA matters

As the free trade negotiations between India and the European Union are entering into a crucial stage, both sides reaffirmed their goal to conclude negotiations by the end of this year. The present negotiation was relaunched in 2022. Earlier, the negotiations for an India–EU Free Trade Agreement (FTA) started in 2007 but encountered delays because of disagreements regarding tariffs, duties, data protection laws, and services. India and Europe have long shared democratic values, people-to-people links, and historical ties, but their partnership never realized its full potential. In 2004, India and the European Union (EU) initiated a Strategic Partnership to enhance cooperation in trade, security, science, and cultural exchanges. But progress remained slow due to differences in trade matters, market access, and intellectual property regulations.

However, bilateral relations saw substantial growth in the twenty-first century. As India’s economic power increased, European nations—particularly France, Germany, and the UK—started to engage more actively. The India–France partnership grew deeper in defence, civil nuclear cooperation, and space exploration. Similarly, Indo-German relations concentrated on green technologies, industrial collaboration, and vocational training, while India–UK ties experienced notable growth in education, finance, and connections driven by the diaspora. This engagement with the wider EU still trailed behind India’s relationships with the United States, Japan, or Southeast Asia.

India follows an independent foreign policy. New Delhi believes its future will involve building strong ties with many countries at the same time and this approach also suits its strategic needs. China is still India’s biggest challenge. Today, India needs bigger foreign investment, advanced technology, and stronger military capabilities to grow and protect itself in a difficult region. In the recent decades India moved closer to the United States for investments and advanced technology. But the recent pressure from Washington is not helping. India is also not comfortable with the Trump administration’s growing closeness to Pakistan, which Washington now sees as a useful partner.  India will remain cautious about the United States after this year’s events. India must look for new sources of technology, defence cooperation, and investment. And the EU is an important alternative.

In fact, India now faces the same problem as many other U.S. partners including the EU. The challenges are quite similar. Both feel they cannot rely on the United States alone as they once did. Both need new partnerships to protect their interests. Both India and Europe share concerns about China also. India’s relations with China may improve slightly, but serious risks remain, including the disputed border and India’s dependence on Chinese-controlled supply chains. Europe also sees China’s trade practices as a threat to its own industries especially in manufacturing, rare-earth minerals, and green technology. These shared concerns create opportunities for better cooperation in several fields.

In October 2025, the EU approved a new agenda to build stronger ties with India in technology and investment. European Commission President Ursula von der Leyen visited India with many commissioners to expand cooperation. Europe now looks like a more dependable security partner, offering defence equipment and expertise in new areas such as space and cybersecurity. Europe also sees India as an important balancing power in the Indo-Pacific. This emerging security aspect adds a new dimension. Europe can also help India in areas where U.S.–India cooperation is weaker, such as renewable energy and quantum computing. European labs and Indian innovation hubs are planning a biotechnology corridor for joint investment and manufacturing.

It does not mean the US will be any less important. Despite recent tensions, the U.S. will likely remain India’s most important partner for technology and investment. Both sides are still working together to resolve the issues. Trade deal that has been in negotiation for months may be finalized soon. American tech companies continue to show major interest in India. Indian businesses also want to keep investing in the U.S., even with threats of tariffs. They want to reduce reliance on China for pharmaceutical supplies. Both sides are reported to be close to finalizing an initial framework trade agreement aimed at addressing the high U.S. tariffs on Indian exports. Both Prime Minister Modi and President Trump continue to emphasize strategic partnership and cooperation across broader areas like defence, technology, and geopolitical coordination.

However, India – EU partnership is very practical and shares five major strategic realities. First the Covid pandemic exposed vulnerabilities in global dependencies, and both India and Europe are now working to diversify, secure, and modernize critical sectors—from pharmaceuticals to semiconductors. Second, both sides understand the need for trusted digital partners. Bigger collaboration is possible in the field of artificial intelligence, quantum computing, cybersecurity, and digital public infrastructure. Third, Europe has long been a champion of climate action, and India has emerged as a leader in clean energy. Both sides are working on renewable energy, green hydrogen, battery technologies, and climate finance—all central to a cleaner and more secure planet. Four, India is a huge market for European industries, especially in the automotive, pharmaceutical, renewable energy, and high-tech sectors. Finally, Europe’s greater engagement in the Indo-Pacific, and India’s central role in the region, make maritime cooperation, connectivity, and rule of law essential pillars of our shared agenda.

That’s why India and the European Union are progressing steadily toward a long-awaited FTA. At the core of Indo–Europe relations are the people and this is also a powerful catalyst. The Indian diaspora in Europe, the increasing number of Indian students enrolled in European universities, and the growing tourism and cultural exchanges have all enhanced mutual understanding. Today, both India and Europe are managing a world where strategic autonomy is more important than ever. Both are in search of dependable partners, and both understand that collaboration rather than isolation is the soul of international diplomacy. An India-EU partnership would flourish because of its historical ties, shared values, ideology and more importantly, practicality.

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