What to expect from the India–EU Alliance?

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Indian Prime Minister Narendra Modi with European Commission President Ursula von der Leyen during a meeting in Delhi (Photo: EPA)

The trade agreement signed between the European Union and India in January 2026 was presented as a historic milestone in the reorganization of global trade. By creating a broad free trade zone between the world’s largest economic bloc and the most populous country on the planet, the pact connects around 2 billion consumers and approximately 25% of global GDP. The agreement foresees deep tariff reductions in sectors such as automobiles, luxury goods, and food products, opening new opportunities for European companies in one of the fastest-growing markets in the world.

Behind the optimistic rhetoric, however, the agreement also reveals a high-risk strategic bet. The initiative is linked to the strategy of friendshoring, which seeks to shift production chains to politically aligned countries, reducing Europe’s dependence on China and mitigating geopolitical uncertainties. Nevertheless, there are doubts about the degree of political alignment with New Delhi. Under the leadership of Prime Minister Narendra Modi, India maintains a pragmatic and multivector foreign policy, preserving relevant economic relations with both Russia and Beijing.

Within Europe’s internal economic landscape, the agreement also raises concerns. While high-technology and luxury sectors may benefit from the opening of the Indian market, traditional European industries, especially in the south and east of the continent, fear a new wave of deindustrialization in the face of the competitiveness of Indian manufacturing. In this context, the real challenge for Europe will be to transform the agreement into an instrument of strategic strengthening, preventing the commercial partnership from contributing to the rise of a new global industrial competitor.

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