In a world that is rapidly fragmenting, with major powers revising their strategic dependencies, the European Union and India are on the verge of closing a trade agreement of historical dimensions. It is not just about lowering tariffs or accessing new markets: the pact would unite around 2.000 billion people and concentrate almost a quarter of the world's GDP. It will be one of the most ambitious moves to redefine the rules of global trade at a critical moment for Brussels due to its confrontation with Washington and its excessive dependence on China. India, an actor that is increasingly influential on the global stage, is at the center of all this.
The trade agreement would link the largest trading bloc in the world with the fastest-growing major economy. India is growing at over 6% annually, has surpassed the UK as the fifth largest economy in the world, and is poised to become the third largest before the end of the decade, only behind the US and China. For the EU, caught between threats from Trump, decoupling from Russia, and the need to reduce its dependence on Beijing, the agreement represents the best strategic bet for diversification.
Many analysts point out that Brussels and New Delhi have a unique opportunity to redefine supply chains at a time when governments and companies worldwide are reassessing alliances and risks.
Next Sunday, the President of the European Council, Antonio Costa, and the President of the Commission, Ursula von der Leyen, will travel to Delhi at the invitation of Indian Prime Minister Narendra Modi. Both will be the guests of honor at the 77th Republic Day (January 26), a gesture laden with diplomatic symbolism as it commemorates the entry into force of India's Constitution, when the country ceased to be under British rule and officially became a sovereign republic. The visit could be crucial for finalizing the ambitious trade agreement.
Bilateral relations between India and the EU, formally strategic since 2004, have gained importance in recent years. The free trade agreement negotiations began in 2007 but stalled for almost a decade due to deep differences on tariffs, standards, and labor mobility. The relaunch in 2022 coincided with the war in Ukraine, the intensification of rivalry between the US and China, and the growing European awareness of the need to explore new markets.
Brussels officials have reiterated in recent days that India has become a key piece of their "risk reduction" strategy: diversifying suppliers, distancing from Beijing, and strengthening ties with reliable partners. Von der Leyen was straightforward about it on Tuesday at the Davos forum: Europe is "on the verge of a historic trade agreement," the "mother of all agreements", framed within a vision of fair trade, resilient supply chains, and cooperation in strategic sectors such as clean technologies, digital infrastructure, pharmaceuticals, and critical raw materials.
The Modi government also has incentives to sign the agreement as soon as possible. The EU is its second-largest trading partner and a crucial source of investment and technology. Indian media have highlighted that broader and stable access to the European market would strengthen the competitiveness of their exports and support the old strategy of made in India, with which Modi aims to turn the South Asian giant into a major manufacturing and technological hub.
The goal is not just to produce more (which is what Delhi has been doing so far) but to produce better: attracting multinational companies seeking alternatives to traditional Chinese factories and creating industrial employment for a young and growing population.
In 2024, India became the most populous country in the world (with over 1.4 billion inhabitants), surpassing China. To finalize the agreement, Delhi demands better conditions from Brussels for the mobility of qualified professionals. In other words, that EU countries open their doors more to Indian workers.
In a more geopolitical context, this trade agreement has observers agreeing that it would consolidate India as the key linchpin: the growing economy in the Indo-Pacific that maintains balance in its close relationships with Russia, Washington, and the European Union.