Faced with challenges from China and the United States, India and the European Union have been negotiating a massive free trade pact, and the talks, first started about two decades ago, are nearing the finish line.
“We are on the cusp of a historic trade deal,” European Commission President Ursula von der Leyen said this week.
Von der Leyen and European Council President Antonio Costa will attend Republic Day celebrations on Monday before an EU-India summit on Tuesday, where they hope to shake hands on the deal.
Achieving a deal described by India’s Commerce Minister Piyush Goyal as “the mother of all deals” would be a major victory for Brussels and New Delhi as they both seek to open new markets in the face of US tariffs and Chinese export controls.
But officials have been keen to emphasize that there is more to it than trade.
“The EU and India are moving closer at a time when the rules-based international order is under unprecedented pressure through wars, coercion and economic fragmentation,” the EU’s top diplomat Kaja Kallas said on Wednesday.
– ‘Untapped potential’ –
Russia’s invasion of Ukraine and US President Donald Trump’s punitive tariffs have given a boost to the India-EU relationship, said Praveen Donthi of the International Crisis Group think tank.
“The EU is looking at the Indian market and seeking to distance a rising power like India from Russia, while India is seeking to diversify its partnerships, doubling down on its multi-alignment strategy at a time when its relations with the United States have taken a downward turn,” he said.
The summit will offer Brussels the opportunity to turn the page after a painful transatlantic crisis in Greenland, now apparently defused.
Together, the EU and India account for around a quarter of the world’s population and GDP.
Bilateral trade in goods reached 120 billion euros ($139 billion) in 2024, an increase of almost 90 percent over the last decade, according to EU figures, with another 60 billion euros ($69 billion) in trade in services.
But both sides are eager to do more.
“India still accounts for around only 2.5 percent of the EU’s total trade in goods, compared to about 15 percent for China,” an EU official said, adding that the figure gave an idea of ​​the “untapped potential” a deal could unlock.
EU car, machinery and chemical manufacturers have much to gain if India lowers entry barriers, said Ignacio GarcÃa Bercero, an analyst at Brussels think tank Bruegel, who led EU trade talks with New Delhi more than a decade ago.
“India is one of the most protected economies in the world, with very, very high tariffs, even on many products where the European Union has a competitive advantage,” he told AFP.
With its economy stagnating, the 27-member EU is also pushing to facilitate exports of spirits and wines and strengthen intellectual property rules.
India – the world’s fastest-growing economy – wants easier market access for products such as textiles and pharmaceuticals.
– Defense pact –
EU officials remained silent on the content of the agreement as negotiations continue.
But agriculture, a sensitive issue in both India and Europe, is likely to play a limited role as New Delhi is eager to protect its dairy and grain sectors.
The talks focus on some sticking points, including the impact of the EU’s carbon border tax on steel exports and safety and quality standards in the pharmaceutical and automotive sectors, according to people familiar with the discussions.
Still, EU officials said they were confident negotiations could be concluded in time for the summit.
Also on the menu is an agreement on mobility to facilitate the movement of seasonal workers, students, researchers and highly qualified professionals, along with a security and defense pact.
The latter envisages closer cooperation in areas including maritime security, cybersecurity and the fight against terrorism, an EU official said. It is also a “precondition” for possible joint production of military equipment, a second EU official said.
New Delhi, which has depended on Moscow for decades for key military equipment, has sought to reduce its dependence on Russia in recent years by diversifying imports and boosting its own domestic manufacturing base. Europe is doing the same with respect to the United States.
“We are ready to open a new chapter in EU-India relations and really unlock what we believe is the transformative potential of this partnership,” another EU official said.