Strengthening India-EU Partnership

• 26 Feb 2025

This editorial is based on “In Trump’s world, India and Europe need each other” which was published in The Indian Express on 26/02/2025. The article highlights that the US’ shifting policies create uncertainty, making Europe a key strategic and economic partner for India.

For Prelims: India-EU relations, Foreign direct investment (FDI), Tariff Reductions, Defense Technology, Joint Military Exercises, Indian Ocean sea, India-EU Trade and Technology Council (TTC), Semiconductors, Artificial Intelligence (AI), Clean Energy Technologies, India-Middle East-Europe Economic Corridor (IMEC), multilateral institutions, G20, WTO, UN Security Council, EU’s Carbon Border Adjustment Mechanism (CBAM), sanitary & Phytosanitary (Sps) Measures, BRICS+, Intellectual Property Rights (IPR). 

For Mains: Significance of India-EU Relations in the Changing Global Order. 

The European Commission President’s recent visit to India, accompanied by the entire College of Commissioners, highlights the growing importance of India-EU relations. As the U.S. foreign policy shifts, with disruptions in transatlantic alliances, trade policies, and security commitments, both India and Europe recognize the need to strengthen their partnership. For India, deepening trade, security, and technology ties with the EU provides economic stability, strategic diversification, and a geopolitical counterweight to China and the U.S. This visit offers an opportunity to expand cooperation and overcome long-standing trade and investment hurdles. 

What is the Significance of India-EU Relations? 

• Economic and Trade Relations: The EU is among India’s largest trading partners (also, India is EU’s 9th largest trading partner), accounting for 12.2% of India’s total trade in 2023, surpassing both the U.S. and China. 
  • Trade in goods between India and the EU grew by 90% in the last decade, while trade in services surged by 96% from 2020 to 2023. 
  • 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 could alter global alignments, making it imperative for India to broaden partnerships. 
  • 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. 

Key India-EU Initiatives 

• Strategic Cooperation & Global Governance: 
  • EU-India Strategic Partnership: A Roadmap to 2025: Strengthens trade, investment, digitalization, climate change, security, global governance and climate resilience, ensuring sustainable growth and technological advancement. 
    • Focuses on clean energy, connectivity, and security, enhancing India-EU cooperation across key economic sectors. 
• Energy & Climate Action: 
  • EU-India Clean Energy and Climate Partnership: Expands collaboration in renewable energy, smart grids, and clean technology financing for sustainable energy. 
    • Supports climate adaptation and mitigation, enhancing India’s role in the global green transition. 
  • EU-India Green Hydrogen Partnership: Develops policy frameworks and pilot projects to promote green hydrogen and offshore wind energy. 
    • Supports India’s clean energy goals with a €1 billion European Investment Bank (EIB) fund. 
  • Sustainable Consumption & Production (SWITCH-Asia Programme): Encourages eco-friendly manufacturing, waste management, and sustainable consumer practices. 
    • Reduces environmental footprint, advancing circular economy initiatives. 
• Trade & Economic Cooperation: 
  • EU-India Trade and Technology Council (TTC): Enhances digital governance, trade resilience, and green technology partnerships for future-ready economies. 
    • Strengthens supply chain diversification, reducing economic dependence on single-market sources. 
  • Global Green Bonds Initiative: Promotes issuance of green bonds to finance sustainable infrastructure and climate projects. 
    • Enhances climate finance frameworks, attracting private investment in clean energy. 
• Sustainable Urbanization & Connectivity: 
  • EU-India Connectivity Partnership: Enhances digital and physical infrastructure, improving supply chains and logistics. 
    • Strengthens transport networks, urban mobility, and cross-regional economic integration. 
  • India-EU Urban Forum: It enables dialogue among officials, experts, and stakeholders to share best practices, policies, and innovative approaches for sustainable urban development. 
• Social Development & Gender Equality: 
  • WeEmpower India Initiative: Strengthens gender equality and women’s participation in clean energy and sustainable industries. 
    • Supports female entrepreneurship and inclusive business models, boosting economic diversity.

What Are the Challenges for India-EU Relations? 

• Stalled Free Trade Agreement (FTA) Negotiations: EU demands lower tariffs on automobiles, spirits, and dairy, conflicting with India’s domestic trade policies. 
  • India seeks greater market access for pharmaceuticals, IT services, and agricultural products, facing strict EU regulations. 
  • The EU’s Carbon Border Adjustment Mechanism (CBAM) poses additional challenges for Indian exporters. 
• 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. 
  • Indian firms require expensive compliance mechanisms to access the EU market. 
• Foreign Policy Divergences: The EU expects stronger Indian alignment on sanctions against Russia, while India maintains a neutral stance, prioritizing diplomacy. 
  • India’s multi-alignment approach with Russia, the U.S., and Europe leads to occasional policy misalignments with Brussels. 
• Limited Defense Cooperation: India’s deep defense ties with Russia and growing engagements with the U.S. leave little room for European defense collaborations. 
  • The EU’s fragmented defense strategy creates uncertainties in long-term security commitments. 
• Supply Chain Risks: Despite India’s efforts to diversify trade, China remains a major economic player for both India and the EU. 
  • Building alternative supply chains requires sustained investment and regulatory adjustments. 

What Should Be the Way Forward? 

• 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. 
• 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. 
  • Align India’s Indo-Pacific strategy with European defense priorities to counter China’s regional assertiveness. 
• Develop Alternative Supply Chains: Expand semiconductor and AI collaborations under the India-EU Trade and Technology Council (TTC). 
  • Strengthening the IMEC 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. 
  • 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. 
• 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, BRICS+, and UN Security Council reforms will elevate India’s global influence. 
• 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. 

Conclusion 

The India-EU partnership is at a critical juncture, with economic, security, and technological collaborations shaping their future engagement. Addressing trade disputes, regulatory barriers, and geopolitical divergences will be key to realizing the full potential of this partnership. A stronger India-EU alliance will enhance global stability, drive economic resilience, and reinforce India's role in the evolving global order.

Drishti Mains Question:

What are the key impediments in India-EU relations, and how can both sides overcome them to build a more resilient partnership? 

UPSC Civil Services Examination Previous Year Questions (PYQs) 

Prelims: 

Q. The term ‘Digital Single Market Strategy’ seen in the news refers to (2017)

(a) ASEAN  

(b) BRICS 

(c) EU  

(d) G20 

Ans: (c) 

Q. ‘European Stability Mechanism’, sometimes seen in the news is an (2016)

(a) agency created by EU to deal with the impact of millions of refugees arriving from Middle East 

(b) agency of EU that provides financial assistance to eurozone countries 

(c) agency of EU to deal with all the bilateral and multilateral agreements on trade 

(d) agency of EU to deal with the conflicts arising among the member countries 

Ans: (b)