Staff writer Manya Pasricha explains how the EU-India free trade agreement indicates Europe’s effort to reduce reliance on China and strengthen economic ties with India.
For years, Europe’s Asia story had a single protagonist: China. Factories in Guangdong powered German exports, Shanghai symbolised opportunity, and boardrooms across the continent treated Beijing as indispensable. That centrality is not disappearing. But it is no longer exclusive. When Prime Minister Narendra Modi called the newly concluded free trade agreement with the European Union “historic”, and Ursula von der Leyen described it as the “mother of all deals”, the rhetoric indicated something larger than tariff cuts. It signalled a structural recalibration. Europe is quietly rebalancing its economic centre of gravity in Asia, and India is moving from secondary partner to strategic pillar.
This is not a story of replacement. China remains deeply embedded in European supply chains and still dwarfs India in overall trade volumes. But the momentum and tilt of this axis has shifted. Trade between the EU and India has surged by nearly 90 per cent over the past decade, making the EU, India’s largest trading partner. European investment in India has accelerated sharply since 2019, with thousands of European firms now operating across the country. At the same time, new European investment into China has become more cautious and politically sensitive. The free trade agreement formalises that shift. Once implemented, it will open nearly all tariff lines between the two sides. Indian exporters in textiles, footwear and jewellery will gain immediate duty-free access across most of the European market. European industrial and agri-food sectors will receive the most ambitious market opening India has ever granted, with Brussels estimating billions saved annually in tariffs and exports potentially doubling by 2032.
Yet tariffs are only the surface. The deeper story is trajectory. India’s economy is expanding at over six per cent annually, making it one of the fastest-growing major economies in the world. Its population of 1.45 billion is young and urbanising. Luxury goods sales are rising faster there than in many mature Western markets. For European firms facing stagnation at home and uncertainty abroad, that combination is compelling. Strategic cooperation has expanded in parallel. India is now only the third Asian country, after Japan and South Korea, to hold a defence partnership with the EU. Through the EU–India Trade and Technology Council, cooperation now spans green technology, digital standards, and supply chain resilience. Greek Defence Minister Nikos Dendias recently described India as “necessary-to-have” for Europe, a phrase that underscores the shift in European thinking.
That evolution has been shaped by disruption. The pandemic exposed the risks of over-concentrated supply chains. Russia’s invasion of Ukraine heightened European sensitivity to strategic dependency. Relations between Brussels and Beijing have cooled, with the European Commission describing China as simultaneously a partner, competitor and systemic rival. Investment screening has tightened and de-risking has become part of the official EU language. Against that backdrop, the EU–India FTA represents movement in the opposite direction. Rather than limiting exposure, Brussels is institutionalising integration. India offers not a substitute for China’s manufacturing scale but a second structural anchor in Europe’s Indo-Pacific strategy.
In doing so, the EU is building parallel pillars. The FTA lowers the friction costs of diversification and embeds legal certainty into expanding flows of trade and investment. It converts what was once corporate instinct into strategic policy. There are still constraints, from agricultural sensitivities to environmental regulations and internal EU divisions. Negotiations took fifteen years to conclude. Yet the direction is unmistakable. Twenty-five years ago, China was Europe’s uncontested Asian priority and India was a difficult prospect. Today, India is increasingly described as indispensable to long-term European strategy.
India is not replacing China in Europe’s economic calculus. But the balance within that calculus is adjusting. By formalising one of its most ambitious trade agreements in Asia with India at a moment of increased caution towards China, the EU is redistributing strategic weight within the region. The shift is measured rather than dramatic. Yet over time, such institutional recalibrations can reshape economic geography more profoundly than abrupt ruptures.
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