What’s Behind the EU-India Lovefest? 

 “The paradox about the European Union’s position in the world is that it is both a giant and a dwarf.” Nearly two decades later, this verdict by Kishore Mahbubani still rings true. The Singaporean luminary with family roots from pre-partition India gave credit to Europe for spreading peace but also bemoaned its dependency on the US and lack of strategic vision in a rapidly changing world. Fast forward to 2026: Donald Trump keeps reminding Europeans of how much of they need America for their security and prosperity. Yet, in contrast to 2008 when Mahbubani wrote, dependency is no longer a substitute for strategy but rather a reason to develop one.

Look no further than the free-trade agreement (FTA) unveiled by EU and India at a high-profile summit in Delhi on January 27. For Prime Minister Narendra Modi as his guests from Brussels: the European Commission President Ursula von der Leyen, Antonio Costa who heads the European Council, and the foreign policy supremo Kaja Kallas,  “the mother of all deals” is a response to US unpredictability.   True,  the FTA comes at the tail-end of protracted negotiations which originally started in 2007 and went through ups and downs through the years.  But it was Trump that made Europe and India hit the accelerator in 2025.  Both had a rough ride with their principal partner, the US.  From Liberation Day tariffs, to Trump’s threat to seize Greenland, to his soft line on Russia and on Pakistan unnerving Europeans and Indians respectively,  the list is getting longer daily.  Brussels and New Delhi are heeding the advice Canada’s Prime Minister Mark Carney gave his peers at Davos. They are diversifying partnerships – without necessarily closing the door to the US. Small wonder that days after the summit, the US and India announced they will be signing a trade agreement too, dubbed  “the father of all deals”.

Even if he doesn’t, there is a lot what India and the EU, representing 2 million consumers and 25% of global GDP between the two of them, can do. The FTA is intended to spur badly needed growth at the time when trade barriers are going up across the world. At present, Indian GDP has been expanding by over 7% annually.  Yet in nominal terms it is still a fifth of China’s. India accounts for just under 3% of world exports, compared to 14% for China. The gap in terms of share of global manufacturing capacity is even more staggering: 3% to 30%. In order to catch up, India needs to outgrow its Asian rival by 3-4% annually for several decades ahead, attracting FDI and winning markets abroad. Opening up to the world, notably to the lucrative EU market but also other countries and blocs such as the UK, the European Free Trade Association (Switzerland, Lichtenstein, Norway and Iceland) and Oman, is a must. The EU is the second largest trading partner for India – right after China and ahead of the United States. The FTA will cut 90% of tariffs by value and is expected to double the turnover, with the annual trade in goods at EUR 120bn and in services at EUR 66bn.  Importantly, India is running surplus on both.

For the EU, the access to a huge market as India’s is a major prize too, not least because it is squeezed economically by China, not just Trump. Beyond the export of goods, what matters is teaming up on technology, innovation, and on fighting climate change. Beyond the FTA, a centrepiece of the partnership is the Trade and Technology Council launched in 2023. To European companies, India offers investment opportunities, scale, access to data, and local talent. The mobility partnership signed in New Delhi, India’s inclusion into research programmes such as Horizon, and a possible agreement on investment (similar to the one negotiated with China in 2020 but put on hold since) chart the way forward. 

But to be sure this ambitious agenda means there will be hurdles: from slow-moving bureaucracies in New Delhi, Brussels and member states to political opposition to relaxing rules on visas for Indian students and professionals coming to Europe. EU and India have wisely agreed to keep agriculture largely out of the FTA, and avoid pushback as has been the case with the agreement Brussels recently signed with Mercosur.  Last but not least,  the green agenda presents problems as well as opportunities. The EU’s carbon tariff – the dreaded Carbon Border Adjustment Mechanism (CBAM) –  is an irritant as is India’s continued investment into coal. 

India and Europe have much to gain from one another in the area of security too. At first sight, they are diverging. New Delhi is keen to continue working with Russia, still a principal supplier of defence equipment. Despite Western pressure, India imports vast volumes of Russian crude too. Modi rolled the red carpet for Vladimir Putin last December, one of their many meetings in recent years. Indian troops took part in the Zapad (West) 2025 military exercise. But India has been gradually moving away from Russia on defence, procuring kit from France which accounts for up to 30% of imports as well as from others. The list includes major platforms such as Rafale fighter jets and Scorpene-class submarines. The strategic relationship encompasses technology transfer as well as joint research, development and manufacturing by defence firms such as Safran and Dassault on the French side and BEL and Tata for India. Indians have not forgotten that France was the only permanent member of the UN Security Council which did not shun them after they tested their nuclear weapon in 1998. 

Other member states are keen to exploit opportunities too. German Chancellor Friedrich Merz’s visit in January 2026 highlighted cooperation, e.g. on a USD 10 billion deal to build submarines. India is likewise engaging with Ukraine, which has emerged as a leader on unmanned platforms, and actually has a history of working with defence industries there, not least because they used to be part of the Russian supply chains. 

This spaghetti bowl of relationships is now taking a pan-EU dimension. At the New Delhi summit, Modi and von der Leyen/Costa inked a Security and Defence Partnership. It speaks to India’s desire to take part  and profit from Europe’s ongoing rearmament boosted and growing expenditure on security. New Delhi is keen to be included in PESCO, an EU-wide platform whose purpose is to encourage member states to jointly plan, develop and deploy military capabilities. It can look at other Asian powers such as Japan and South Korea that are already working with consortia of European nations on strategic defence projects. In addition, New Delhi is also appreciative of the fact that no EU member state has deep strategic ties with Pakistan either.  

The Europe-India lovefest has a political price, to be sure. In embracing pragmatism, Europeans are insisting they haven’t scrapped normative concerns – e.g. on labour, environment, human rights and democracy –  while reaching out to their friends. While that might be the case, it is clear that they will not be in the business of calling out Modi and the BJP for democratic backsliding in India. Similarly, they would have to accept that India won’t burn bridges to the Russians, but rather disentangle itself at a slow pace while extracting concessions from Moscow. 

Ties between Europe and India are set to grow. The presence of von der Leyen, Costa (a proud holder of Overseas Citizen of India or OCI card, courtesy of his Goan heritage) and Kallas on the Republic Day Parade on January 26 is a sign enough. As the EU is discovering the virtues of “strategic autonomy”,  Indians feel they can teach their guests a lesson or two. But for them, the overseas giant dwarf is the perfect mate: wealthy, fairly predictable and too geographically distant to pose any strategic dilemmas. And if everything goes according to plan, Europeans might have found in India the perfect testing ground for their newly acquired geopolitical mojo.