When Multilateralism Meets Multialignment: How Can the EU and India Partner in a Fragmenting Global Order?

CSDS POLICY BRIEF • 3/2026

By Domenico Farinelli and Giulia Tercovich

26.1.2026

Key issues

• Geopolitical fragmentation, economic coercion and intensifying great-power competition have turned the EU-India relationship into a strategic asset for European security;
• A comprehensive EU-India Free Trade Agreement, combined with structured cooperation on technology, connectivity and defence, would strengthen Europe’s economic security, reduce its strategic dependencies and enhance its capacity to act in the Indo-Pacific;
• While regulatory divergences and mutual distrust have long constrained cooperation, the current alignment of strategic interests offers an unprecedented window for the EU and India to consolidate a partnership that supports their economic and security objectives.

 

Introduction

In the context of a fragmenting international order, the European Union (EU) and India have entered a moment of exceptional strategic alignment, with 2026 set to represent a pivotal year in the evolution of their relations. Indeed, renewed great power rivalry and the rise of economic coercion have eroded the foundations of globalisation, forcing both Brussels and New Delhi to reconsider long-standing assumptions about their economic and security policies.

For Europe, increased volatility in the policies of the United States (US), excessive dependence on Chinese manufacturing and structural vulnerabilities in the supply chain of critical technologies have moved economic security to the very core of the agenda. What was once a secondary concern for the European Commission has now become a defining element of all European strategies, shaping the EU’s internal policies as well as the rationale of its engagement with global partners.

For India, the strategic challenge is no less pressing. New Delhi aims to safeguard its hard‑won strategic autonomy while simultaneously entrenching its status as a key Indo‑Pacific power. This dual objective requires India to navigate mounting pressure from both China and the US, as well as to consolidate its role as the linchpin of South Asia’s economic and security architecture.

In February 2025, a diplomatic mission to New Delhi – one of the few involving nearly the entire College of Commissioners – signalled a decisive reassessment of India’s importance in the eyes of the EU. While diplomatic symbolism alone cannot bridge the gaps that have historically limited cooperation, the visit denoted a remarkable strategic shift: for the first time, the EU defined its ties with India not merely as a promising relationship, but rather as a ‘consequential partnership’ to navigate emerging threats and global challenges. In September 2025, this political reassessment was integrated into the Joint Communication on a New Strategic EU–India Agenda, which frames EU-India relations as indispensable for the long-term security of both Europe and the Indo-Pacific.

This reassessment is not limited to Brussels. Recent analyses highlight the emergence of a rare consensus around India’s strategic importance, with several member states now viewing deeper engagement with New Delhi as overdue and increasingly urgent. More recently, German Cauncellor Friedrich Merz suggested that the EU could sign a free trade agreement (FTA) with India by the end of January 2026, during President von der Leyen’s next visit to the country. Concluding such an agreement would bring to an end a long and complex negotiation process that began in 2007.

Against this backdrop, this policy brief examines whether the current momentum can be translated into a durable strategic partnership. It assesses the potential and the limits of an eventual FTA, not as a trade instrument alone, but as a core component of a broader EU–India strategic alignment, and argues that its security and geopolitical benefits are likely to outweigh the possible economic and regulatory costs.

The strategic environment: a fragmenting global order

The EU and India see the world – and their own role within it – through markedly different lenses.

On the one hand, India interprets contemporary international politics along two axes of strategic competition: the structural rivalry between the US and China, and the highly disruptive but less ideational confrontation between the US and Russia. While the former is reshaping critical value chains, technology ecosystems and the regional balance of power in the Indo-Pacific, the latter complicates India’s defence posture due to its dependence on Russian military platforms.

In this framework, India’s self-understanding as both the main representative of the “Global South” and an increasingly influential actor in Western-led diplomatic forums, such as the G7, underpins its determination to pursue “multialignment”. This approach allows New Delhi to pursue overlapping political, economic, and security partnerships without binding itself to exclusive alliances, thereby maximising strategic flexibility under mounting systemic pressure. Within this framework, the EU plays a key role in India’s strategy to diversify external relations.

On the other hand, the EU regards the contemporary international system as an unstable environment characterised by weakened multilateralism and renewed great power competition. Many European leaders interpret this moment as a call for greater strategic autonomy, stressing the need to balance a realist approach with the protection (and promotion) of the EU’s democratic norms and values. Specifically, the fragility of critical supply chains built on the assumption of a stable globalisation has revealed Europe’s exposure to economic coercion. Rising concerns about competitiveness gaps with China, dependence on external suppliers for strategic technologies and unpredictable shifts in US policy have pressured the EU to broaden its circle of reliable partners: India’s unparalleled scale, political stability and geostrategic salience render it uniquely important among non‑allied major powers in the eyes of the EU.

In essence, although the EU and India pursue different foreign policy agendas, systemic pressures and common challenges incentivise both parties to seek closer bilateral cooperation. That said, recent debates in Europe reflect a strategic dilemma on how to approach India. While some voices call for leveraging existing ties with India to foster political and normative alignment, particularly on key issues such as Russia’s invasion of Ukraine and multilateral global governance, others suggest that the EU should focus its efforts on technical cooperation in selected domains – ranging from trade to technology and connectivity – and avoid linkage politics that risk stalling progress.

Economic foundations: trade, investment and strategic interdependence

Considering the size and complementarity of both economies, trade and investment between the EU and India remain significantly below potential. Although the EU is New Delhi’s largest trading partner, India’s relatively high average tariffs (about 17%) and the persistence of regulatory barriers on both sides have long constrained bilateral trade, diverting flows toward countries with preferential trade agreements already in place.

The agreement under discussion presents the opportunity to correct this relative underperformance. In 2023, the EU’s Trade Sustainability Impact Assessment estimated that the ratification of a truly comprehensive FTA would allow the EU’s exports to India to grow by 107.6% (€112.5 billion), while India’s merchandise exports to the EU are expected to rise by 86.6% (€110.7 billion). Even under more conservative scenarios, both sides are set to gain substantially across a wide range of sectors, thereby reinforcing the economic rationale for deeper integration. This is particularly true in key strategic areas of trade, including: chemicals, pharmaceuticals, mineral products, metals, electronics and more.

Beyond these quantitative gains, the ratification of an FTA would anchor EU-India economic relations in a rules‑based framework at a moment when global trade governance is under unprecedented strain. In an international environment increasingly shaped by unilateralism and economic coercion, such an agreement would carry strategic significance that extends well beyond trade liberalisation.

Consequently, both parties attribute exceptional importance to ratifying a truly comprehensive trade agreement. For the EU, India represents a critical partner to mitigate its dependence on China in strategic sectors such as pharmaceuticals, chemicals, textiles and green‑technology inputs. This logic aligns with the EU’s broader economic security agenda, which frames cooperation with India as a means for de-risking critical supply chains, reducing over-dependence on single suppliers and mitigating the weaponisation of interdependence, objectives that now sit at the very core of European security thinking. For India, the EU constitute a critical source of sustainable investment and advanced technology, both of which are indispensable for upgrading India’s manufacturing base and accelerating its green transition alongside broader socio-economic development.

Notwithstanding this notable convergence, several obstacles continue to obstruct the development of bilateral trade. European firms operating in India frequently point to regulatory unpredictability, abrupt tariff changes and complex compliance requirements that characterise the Indian market.

India, by contrast, while recognising the value of the EU’s regulatory frameworks for market access and predictability, regards some aspects of the EU’s sustainability rules as non-tariff barriers, which could constrain India’s room for manoeuvre in defining its industrial development policy. In addition, specific political sensitivities—such as India’s request for recognition of Basmati rice as a protected designation—illustrate how bilateral trade negotiations may have wider regional implications.

Given that these hurdles are common between partners characterised by different economic policy traditions and do not reflect any irreconcilable state interest, as demonstrated by debates surrounding other EU trade agreements, including the recent one with MERCOSUR. Rather than reflecting irreconcilable interests, they point to the need for a calibrated approach, combining predictable regulatory dialogue, targeted capacity‑building and minimal but credible foreign investment. Such an approach would contribute to narrowing the deficit of mutual trust that has long constrained EU-India economic relations.

In this regard, the recent decision to exclude agriculture from the proposed FTA represents a constructive step. By removing the most politically sensitive sector from the negotiations, both sides have improved the prospects for securing a politically sustainable and strategically meaningful agreement.

Technology, security and connectivity: expanding the EU-India strategic agenda

In addition to the FTA, technology, security and connectivity top the agenda of EU-India relations. The establishment in May 2023 of the EU–India Trade and Technology Council (TTC) represents the most consequential institutional innovation in bilateral relations in recent years. Recognising that the development of technological ecosystems, artificial intelligence, advanced telecommunications, semiconductors and critical raw materials will shape the future balance of power in both military and economic domains, the TTC seeks to enable the EU and India to coordinate on standards, best practices and innovation by providing a structured and regularised forum for bilateral dialogue. At the same time, early assessments suggest that the TTC has so far underperformed relative to initial expectations, reflecting both institutional constraints and the complexity of aligning regulatory and industrial priorities. This has reinforced the EU’s recent push to expand the TTC’s scope, institutional participation and business engagement, which would effectively transform the TTC into a relevant instrument for bilaterally promoting economic security and technological resilience.

Technology cooperation also provides a foundation for broader security and connectivity engagement, particularly in domains where civilian and military applications increasingly overlap.

Security cooperation between the EU and India, though historically limited, is gradually expanding into areas of shared strategic interest. Domains such as maritime security, cyber defence, counter‑terrorism and the protection of undersea infrastructure are particularly conducive to cooperation, as they combine direct security relevance with relatively low political sensitivity. Defence-industrial partnerships, traditionally pursued through bilateral arrangements between India and individual member states, most notably France, promise to become increasingly relevant also at the EU level, particularly as India diversifies away from Russian defence systems and looks for alternative partners. In this context, in October 2025, the EU called for an acceleration of the establishment of a Security and Defence Partnership with India, which reflects a significant evolution in Brussels’ strategic posture, acknowledging India’s growing role as a security provider in the Indian Ocean and a stabilising actor in the Indo-Pacific.

<Finally, connectivity has also emerged as a key strategic domain in the Indo-Pacific. The EU’s Global Gateway initiative offers an alternative to China’s Belt and Road Initiative, and India’s regional connectivity plans may well complement this effort. Thus, the EU and India have begun to explore the potential for trilateral cooperation in third‑country contexts. This approach promises to leverage both Europe’s financing capacity and India’s regional legitimacy to create a more competitive and politically resilient model for international connectivity cooperation.

Structural constraints and evolving political realities

Despite multiple synergies, four structural constraints continue to limit EU-India cooperation.

First, regulatory divergence remains a challenge. The EU tends to externalise its internal regulatory model through trade policy, particularly its environmental sustainability framework. While India has committed to environmental and labour reforms, it remains wary of regulatory requirements that it often perceives as overly prescriptive or even “extraterritorial”. Addressing this tension might require phased implementation, mutual recognition mechanisms and joint standard‑setting rather than unilateral conditionalities. Indeed, excessive regulatory assertiveness on the part of the EU risks undermining the core objectives that Brussels is seeking through its engagement with India – economic diversification and strategic projection. By contrast, a milder approach is more likely to serve Europe’s fundamental interests, given the internal political economy challenges that have complicated recent EU free trade negotiations, where concerns over unfair competition and regulatory asymmetries—rather than sustainability standards alone—have emerged as key obstacles to ratification.

Second, divergent threat perceptions, particularly regarding Russia, constitute a structural constraint on deeper EU-India cooperation. These divergences are compounded by a persistent sense of underperformance, which continues to undermine mutual trust. While European actors often view India as a cautious or inconsistent reformer, Indian policymakers argue that the EU underestimates India’s developmental constraints and overemphasises normative instruments at the expense of strategic priorities.

Differences over how to engage Russia following its invasion of Ukraine, as well as the EU’s perceived cautious positioning on the Indo-Pakistan conflict, illustrate the limits of political alignment between the two partners. At the same time, these divergences do not negate the strategic value of cooperation. European policymakers increasingly recognise that insisting on full political convergence risks paralysing engagement, whereas a more flexible and pragmatic approach allows cooperation to advance where interests overlap without requiring endorsement of India’s broader strategic posture.

Third, Brussels and New Delhi’s political caution and institutional complexity further shape the pace and scope of EU–India cooperation. While strategic incentives for expanding cooperation remain strong, historical experience and bureaucratic complexity contribute to slowing the pace of this cooperation. Overcoming this inertia requires clearer political signals at the highest political level, as well as novel institutional mechanisms, such as the TTC, capable of translating strategic intent into implementable outcomes.

Fourth, the institutional configuration of the EU itself constitutes a challenge to deeper EU–India relations. Historically, EU-India relations have been facilitated by the United Kingdom, which served as India’s strategic gateway to the European market. Brexit has altered this dynamic, increasing the importance of direct engagement with EU institutions as the primary gateway to market integration. In this context, the effectiveness of any EU–India Free Trade Agreement ultimately depends on its ratification by all member states and the European Parliament. While India has traditionally sought to advance its interests through bilateral engagement with individual member states, full and durable access to the European market can only be secured through comprehensive engagement at the EU level. Strengthening the Commission’s capacity to act as a credible and effective trade negotiator is therefore in India’s strategic interest, as it remains the only actor capable of aggregating and reconciling diverse national positions. This approach would mark a shift from India’s past preference for bilateralism, but it reflects the institutional realities of the EU’s trade policy.

Taken together, these structural constraints do not preclude deeper EU–India cooperation, but they underscore that any strategic convergence will depend on carefully calibrated engagement that reflects both geopolitical realities and Brussels and Delhi’s institutional complexity.

The implications of closer cooperation for European and Indian core interests

A deeper EU-India partnership would materially advance both the EU’s and India’s core interests.

For Europe, it would reduce exposure to concentrated supply chains, support the diversification of critical technologies and reinforce the EU’s presence in the Indo‑Pacific, the central arena of global competition. Moreover, by cooperating with India, the EU could try to uphold a more pluralistic and rules‑based international order at a time when traditional alliances face uncertainty. Overall, the implications of closer EU-India cooperation mirror the priorities that have been set out in the EU’s latest strategic agenda, which places prosperity, technology, security, connectivity and institutional enablers at the centre of the partnership. Together, these pillars provide a coherent framework for translating pragmatic convergence into durable strategic partnerships.

For India, a closer relationship with the EU would both enhance New Delhi’s strategic autonomy and accelerate economic development by broadening access to advanced technologies, stable investment flows and diversified security cooperation. Furthermore, it would signal to both the US and China that India has other, more reliable partners to engage with, thereby strengthening New Delhi’s stance.

Despite the unprecedented convergence between European and Indian interests, major constraints continue to slow down the development of the EU-India strategic partnership. Addressing these obstacles requires political commitment from both sides, coupled with institutional discipline and openness to reconcile two differing regulatory philosophies. The present moment constitutes a rare opportunity: if seized, bilateral cooperation will enhance both European security and India’s global ambitions. If missed, Brussels and New Delhi will have to deal separately with a world where geopolitical competition continues to sharpen and risks for security continue to multiply.

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