Negotiators weigh billions in trade as European principles clash with Indian interests
The European Union and India are close to concluding one of the most significant trade agreements of the decade. Together, they account for more than a fifth of global GDP. The deal promises: economic growth, easier market access, and stronger cooperation between the two economic powerhouses. Yet the negotiations go beyond tariffs and trade volumes. They raise difficult questions about political values, sustainability, and global alliances. As both partners pursue their economic interests, the talks reveal a broader dilemma: how can economic cooperation be enhanced when principles do not always align?
To understand this dilemma, it is necessary to first look at the economic foundations of the EU–India relationship. Trade figures, investment flows, and market access form the backbone of the negotiations and explain why both sides are so committed to reaching an agreement.
Money: A growing economic partnership
The economic relationship between the European Union and India is one of the most important global partnerships today. Over the last decade, the two sides have increased their trade and investment activities, and they are now trying to create new agreements that could shape their economic future.
Trade between the EU and India has grown strongly. In 2024, their trade in goods reached around €120 billion. This includes products like smartphones, aeroplanes, medicine, diamonds and many other items that move across their borders every day. Services also play a big role. India sells digital services, IT support, and business solutions to European companies, while the EU provides financial, engineering, and transport services to India. Even though this is a large and growing relationship, India still represents only a small share of the EU’s total global trade, meaning there is still much room for expansion.
Investment is another major part of their ties. European companies have invested over €140 billion in India, making the EU one of the largest sources of foreign investment in the Indian economy. Thousands of European companies operate in India, creating jobs and supporting development in many sectors. The Indian investment in the EU is still relatively small, around €10 billion, but it has been slowly increasing as more Indian companies enter European markets. One of the biggest ongoing developments is the effort to negotiate a Free Trade Agreement. This deal aims to lower tariffs, simplify customs procedures, and make trade easier and cheaper for companies on both sides. Talks restarted in 2022 after several years of pause.
Both the EU and India initially aimed to conclude the agreement by the end of 2025. However, as of early January 2026, negotiations have entered their final and most demanding phase, with critical meetings scheduled for January 8-9 in Brussels and a potential deal announcement expected at the India-EU summit on January 27.
Negotiators have made significant progress, closing 11 of the 23 chapters under discussion, including customs facilitation, digital trade, and capital movement. However, difficult areas remain, particularly around rules of origin, market access for wine and dairy products, critical mineral exports, and India’s concerns over the EU’s carbon border adjustment mechanism on steel and cement.
Climate, costs and carbon borders
The EU’s Carbon Border Adjustment Mechanism (CBAM) creates a financial incentive for cleaner production, but it also directly affects India’s exports, which are often carbon intensive. This new carbon tax on imports is designed to reduce CO2 emissions globally, but for India it means added pressure on industries such as steel production, which may face higher costs when exporting to Europe. In addition, differences in environmental regulations, labour standards, and technical rules can slow down progress in the trade talks, making negotiations more complex. CBAM illustrates how EU climate ambitions intersect with India’s economic interests, highlighting the need for careful balancing between sustainability goals and trade opportunities.
Values under negotiation
Despite the many economic benefits of this trade, a significant number of experts and politicians also advocate for fair trade, in which India shows respect for the environment and workers’ rights. Although India scores relatively low in CO₂ emissions per capita, it remains the third-largest polluter in the world. Besides that, India priorities job creation and economic growth, which critics say sometimes comes at the expense of labour rights. Some supporters argue it is necessary for development.
Senior Content Editor in Business Journalism (Octus), Indrani Dattagupta, believes that India should not be lectured when it comes to the free trade agreement. “Engage in dialogue with India, don’t lecture India. When Europe acts as an equal partner, those shared values of democracy and sustainability can bring both sides closer. But when it starts moralizing, the distance just grows.”
Despite the challenges, cooperation between the EU and India continues to grow. Both sides are expanding their work together in technology, clean energy, transport networks, and research. They see each other as important partners for building safer supply chains, supporting innovation, and strengthening their positions in global markets.
Cooperation between societies
Angelika Niebler, MEP of the European People’s Party, states that this trade agreement needs more than just cooperation. “Success means bringing people together. Not only economic cooperation, but also close ties in education, research and defence. Exchange programs for students and universities are very important. We can learn from each other, and a close cooperation would benefit both sides.”
Her emphasis on education, research, and long-term collaboration reflects the broader context of EU–India relations. The economic relationship between the EU and India is strong, growing, and becoming more strategic. Trade is increasing, investment is expanding, and both sides are working toward a major trade agreement that could reshape their future cooperation. Even though some issues still need to be solved, both regions understand that working together brings major benefits.
Between ideals and interests
The European Union and India often say they share similar principles like democracy, cooperation, and fair trade. Politicians regularly describe the relationship as friendly and promising. For example, Angelika Niebler calls India “the biggest and largest democracy in the world” and stresses that it is “a very big market, 1.4 billion people living in India”. This shows how partnership is not only about values, but also strongly about economics and strategy.
Both sides speak proudly about democracy, but both face criticism. India is often questioned on human rights, press freedom and the treatment of minorities. “There certainly are some issues in India. They have a nationalist government, which puts freedom of religion under stress. There is the oppression of Islamic minorities, and Christian minorities are also under stress. The EU will certainly include reference to human rights in the agreement, but they don’t intend to let this weigh very much. India, like other major trade partners, wants to stress its independence and ambition to become the next big power. That’s why it won’t accept directives from former powers like the EU. A trade agreement never sharpens existing objectives of international agreements. They just want to acknowledge that the country participates in previous agreements,” says Renaat Hanssens, from the Christian Union ACV. Meanwhile, the EU also struggles with nationalism, disagreement between member states, and its handling of migrants. So, while democracy is a shared principle in words, in reality both sides have weaknesses.
Trade cooperation vs. standards
Human rights and equality are another important principle, but again, practice is harder than promises. The EU wants to include human rights, labor, and environmental standards in cooperation. Niebler says, “we are not only working on a free trade agreement, but we have also a human rights dialogue in place”. However, India often sees this as interference, which creates tension. “India is referring to several EU regulations, mostly adopted for green objectives, such as the sea and deforestation regulations. All of those have a clear environmental rationale attached to them, and they are non-discriminatory in nature. Therefore, it is not proper to see them as obstacles to India’s development. On the contrary, the free trade agreement, but also bilateral engagement with India, should provide an opportunity to identify better ways for India and the European Union to cooperate on core environmental objectives”, states Ignacio Garcia Bercero, former EU chief trade negotiator and current Bruegel Senior Fellow.
Trade cooperation is one of the biggest topics. Both sides want economic benefits, but negotiations are difficult. Niebler explains that India “is not willing to accept our high standards in environmental terms, in social terms” and that Indians believe the EU is “a sort of protectionist… with non-tariff barriers”. This shows clearly that both sides defend their own interests first, even while talking about “shared principles”.
At the same time, the geopolitical situation pushes both to work together. The EU wants to “diversify… not relying only on one partner in the world” and sees India as a “trustworthy partner” in a changing world. India also wants to reduce its dependence on China and Russia. So, security and strategy are becoming as important as values.
Taken together, these dynamics show that the EU and India constantly speak about shared values and principles, but their relationship is shaped just as much by power, trade, and politics. Their partnership is important and full of potential, but it is not simple. As the interview shows, it requires negotiation, honesty, and compromise, not just beautiful speeches about friendship and democracy.
New world order: Geopolitical strategies collide
The era of Pax Americana is fading. Across the Pacific, a once-sleeping Chinese giant has awakened. Beyond the Himalayas, the Indian subcontinent is roaring with economic growth. Together, these powers signal the rise of the Global South, and a profound shift in the balance of power.
These developments form an important backdrop to the negotiations on a free trade agreement between the European Union and India. Trade talks today are no longer insulated from geopolitics; they are shaped by it.
Vishwa Mitra
While the European Union is deeply invested in Ukraine, India maintains economic ties with Russia. Both countries are key members of the BRICS bloc, reflecting India’s long-standing strategy of strategic autonomy rather than alignment. This divergence complicates negotiations with Brussels.
“The positioning of India on the war in Ukraine is not certainly something that is favorable” says Ignacio Garcia Bercero, former EU chief trade negotiator. “But at the same time, it is very clear that India and the European Union have a strong interest in getting this agreement concluded. That means there are differences in geopolitical perspectives that need to be understood.”
India itself frames this neutrality as a strength. In a recent press release, the Ministry of Commerce & Industry describes the EU–India FTA as part of India’s emergence as a Vishwa Mitra (a partner to the world). The agreement is presented as an instrument to promote diversified production networks and uphold fair trade principles. As India continues to expand its network of free trade agreements, the dialogue with the EU reflects a broader ambition: shaping a future-ready economic framework aligned with both national priorities and global aspirations.
The export dragon
The need for diversification is an urgency for these future partners. Both the EU and India are too dependent on Chinese supply chains. In 2024, India imported eight times what it exported back to China, resulting in a trade deficit of almost one hundred billion US dollars. Also, the EU bought more goods from Beijing than it could sell: roughly 600 billion dollars were imported from China, while the Chinese imported roughly 250 billion dollars. This brings a total profit of 450 billion dollars to Beijing. In 2024, China earned through trade with India and the EU an amount equivalent to more than half of Belgium’s total economy.
Money, principles, and power
India and the EU have a delicate relationship. Economic interests drive cooperation, but shared values, human rights, and environmental standards constantly test the partnership. At the same time, geopolitics shapes the decision-making process of both sides.
The negotiations over the Free Trade Agreement show that trade cannot be separated from principles or global politics. Each part defends their interests but also recognizes the benefits of trade. As Angelika Niebler highlighted, cooperation is not only about goods and services, but also about education, research, and long-term exchanges that strengthen ties beyond economics.
In the end, EU-India partnership is neither simple nor predictable. It is a complex mix of different factors that really require negotiation. Strategic thinking handed carefully could lead to a new example of how global powers can cooperate to while managing conflicting priorities.
