India and the EU have plenty to gain by forging closer bilateral ties

To be sure, progress on India’s FTA with the European Union has not been insubstantial. Both sides have committed themselves to signing it by the end of this calendar year. When it happens, it will be the world’s largest deal of its kind. A trade pact between both sides will not just strengthen our trade and investment links, but also help foster innovation, sustainability and resilient supply chains.

Also Read: India's trade trajectory: FTAs and beyond

Equally important is this visit’s message across the world: India is willing to promote international trade and negotiate tariffs without sacrificing its economic interests. Coupled with its commitment to negotiate the first tranche of a mutually beneficial multi-sector bilateral trade agreement (BTA) with the US by the autumn of 2025, the proposed FTA with the EU dispels many misgivings about India’s supposed protectionism.

This is why, in his opening address at the plenary session with the EC President on 28 February, Prime Minister Narendra Modi identified trade and investment as the first priority area of cooperation with the EU. In the last fiscal year, the EU was India’s largest trading partner, with bilateral trade reaching $137.5 billion.

The EC President’s visit and Modi’s recent visit to the US underline that India’s approach is forward-looking, realistic and pragmatic. It is surely not doctrinaire. Our policy- and decision-makers favour free trade, but are not captivated by it. 

They are unlikely to overlook the concerns of corporate India and are cognizant of new non-tariff barriers, such as the EU’s Carbon Border Adjustment Mechanism (CBAM) and the EU Deforestation Regulation (EUDR). India’s Economic Survey 2024-25 was unequivocal about their real purpose: “Both CBAM and EUDR are trade protection measures garbed in the language of climate and environment."

Also Read: The EU’s CBAM has lent urgency to fair carbon prices

The CBAM and EUDR can have a $9.5 billion impact on India’s exports to the EU, which amounts to 9% of India’s exports to the world or 12.9% of India’s exports to the EU, the survey said. India’s negotiators are expected to argue in favour of lowering non-tariff barriers.

Against the backdrop of its ongoing discussions on trade with the US, the EU wants to augment trade with India. This is the reason that Von der Leyen emphasized improving market access and removing trade barriers between India and the EU.

Besides, the EU wants to de-risk its economy’s exposure to China, especially in industries like pharmaceuticals, batteries, semiconductors and green hydrogen. This is where Indian and EU interests converge. Strengthening supply-chain resilience is also high on Prime Minister Modi’s agenda. “Our capabilities can complement each other in sectors such as electronics, semiconductors, telecom, engineering, defence and pharma. This will strengthen diversification and de-risking, and will aid in the creation of a secure, reliable and trusted supply and value chain," he said.

Modi also laid emphasis on people-to-people ties, saying that India and the EU must make migration, mobility, Schengen visas and EU Blue Cards simple and smooth. This stands to fulfil the needs of the EU.

The complementarities between India and the EU are quite obvious. Of course, there are areas of friction between the two sides, but there are no differences that cannot be ironed out.

It’s noteworthy that Von der Leyen’s view on geopolitical and geo-economic issues is not dissimilar to India’s. She is not very comfortable with “spheres of influence and isolationism." Like India, the EC views with concern the weaponization of sources of strength by some countries, be it natural resources or new technologies. Dependence on supply chains and their disruption have hurt many economies around the world.

Modi also stated that the India-EU partnership holds even more importance in the backdrop of rapidly evolving geo-economic and geopolitical circumstances. He highlighted a common belief in democratic values, strategic autonomy and a rules-based global order that unite India and the EU.

Also Read: Will Germany under Friedrich Merz script the EU’s independence from America?

At any rate, India’s behaviour among the comity of nations has been exemplary since Independence. It has always championed the cause of peace and harmony. When the covid pandemic was raging, for example, India helped other countries in every possible manner, whether it was by way of supplying personal protective equipment kits or covid vaccines.

Unsurprisingly, what unites India and the EU is their pragmatic approach: they are willing to move ahead together regardless of all the economic and political vicissitudes across the globe. This has added a new urgency to bilateral engagements. Indian ministers have made it clear that bilateral arrangements are on the ascendance.

In her address on 28 February, Von der Leyen cited the widely reported perfect alignment of seven planets on that day. “They say that this event signals transformation and growth, and that’s exactly the moment we find ourselves in. The planets are aligned, and so are Europe and India."

Both must strive to seize the moment.

The author is director general, Federation of Indian Chambers of Commerce and Industry.