NEW DELHI: After nearly two decades of stalled negotiations, the sudden political momentum behind the India–European Union trade agreement is driven less by tariffs alone and more by a rapidly shifting geoeconomic order.
As global trade fragments under the weight of strategic rivalry, sanctions and protectionism, New Delhi and Brussels have found compelling reasons to move faster and closer.
European Commission President Ursula von der Leyen’s description of the pact as the “mother of all deals” and Prime Minister Narendra Modi’s characterisation of it as “historic” reflect more than diplomatic hyperbole. The agreement brings together the world’s fourth- and second-largest economies, accounting for nearly a quarter of global GDP and a combined market of two billion people.
For India, the deal comes amid growing uncertainty in its trade relationship with the United States. President Donald Trump’s imposition of 50 per cent tariffs last year has hit labour-intensive sectors such as textiles, shrimp farming, and gems and jewellery, even as talks on an India–US trade pact continue to drag on.
Diversifying trade partnerships has therefore become a strategic necessity rather than an option. Recent agreements with the UK, Australia, Oman, New Zealand and the European Free Trade Association bloc underscore New Delhi’s “many baskets” approach.
For the EU, the calculus is equally geostrategic. With transatlantic ties increasingly volatile, illustrated by Trump’s recent threat to escalate a trade war with European allies over Greenland, the bloc is seeking economic certainty and strategic autonomy. As EU foreign policy chief Kaja Kallas bluntly put it, “We can’t put all our eggs in the same basket.” Europe may not be a military superpower, she acknowledged, but it remains an economic one, and trade is its primary lever.
That broader geopolitical context was evident in leaders’ statements. European Council President Antonio Costa said the deal sends an “important political message” to a world increasingly defined by tariffs and coercion. Von der Leyen framed it as a “win-win partnership” between two giants choosing cooperation over confrontation. The agreement goes beyond tariff cuts, encompassing a joint security partnership and a mobility framework to ease short-term movement for professionals, signalling convergence not just in commerce, but in strategic outlook. The proposed “graduation” of the India–Middle East–Europe Economic Corridor (IMEC) to a higher-level forum further reflects shared ambitions to reshape supply chains and regional connectivity.
Russia, however, remains a delicate undercurrent. EU leaders have been explicit in urging India to use its channels with Moscow to push for peace, with Kallas accusing Russia of “pretending” to negotiate. While India continues to balance its long-standing ties with Russia, closer alignment with the EU subtly raises Western expectations of New Delhi’s diplomatic role in the Ukraine conflict.
Economically, Germany and France are expected to be among the biggest EU beneficiaries, even if the deal falls short of the “super ambitious” version once envisaged.
Analysts such as Andrew Small of the European Council on Foreign Relations see the agreement as a foundation rather than a finish line, an entry point into India’s fast-growing market rather than a final destination. Unlike the EU’s contentious Mercosur agreement, the India pact has avoided politically explosive areas, making ratification more likely. The visible camaraderie between Indian and EU negotiators ahead of the summit underscored the political will to make it work.
Ultimately, this is less a traditional trade deal than a geoeconomic alignment shaped by global turbulence. As Modi put it, it is a “new blueprint for shared prosperity”. Whether it evolves into a durable strategic partnership will depend on how both sides navigate the complex road ahead, balancing growth, security and an increasingly polarised world order.