NOTE4STUDENTS:

India and the European Union (EU) are strengthening ties as Poland assumes the EU Presidency in 2025. UPSC often asks questions from such topics in two ways: direct factual questions in Prelims and analytical ones in Mains. For Prelims, questions may focus on agreements, historical milestones, and policy initiatives. Mains questions usually demand an understanding of India’s foreign policy approach, economic diplomacy, and strategic interests. Many students struggle to connect current affairs with broader themes, leading to superficial answers. They often memorize facts without grasping their relevance, making it difficult to structure well-rounded answers. This article addresses these gaps by breaking down complex negotiations, historical phases, and critical challenges in India-EU relations. It links trade, technology, and strategic autonomy with India’s global positioning, helping readers develop a deeper analytical perspective. The section on “Pain Points in India-EU FTA” is particularly useful, as it simplifies the contentious issues in trade negotiations, making it easier to recall and use in answers. A standout feature of this article is its structured approach. The timeline of India-EU relations, key challenges, and proposed solutions provide a ready-made framework for exam answers. By understanding these insights, students can enhance their ability to write balanced, well-supported answers in UPSC Mains and tackle tricky Prelims questions with confidence.

PYQ ANCHORING & MICROTHEMES

GS 2: ‘The expansion and strengthening of NATO and a stronger US-Europe strategic partnership works well in India.’ What is your opinion about this statement? Give reasons and examples to support your answer. [2023]

Microthemes: Geopolitics affecting India’s interests

Poland, assuming EU Presidency in 2025, prioritises enhancing European security and deepening ties with India, a key partner in global stability. EU-India relations will strengthen through a new strategic agenda, culminating in a summit. The ongoing “FTA 2.0” negotiations aim for a mutually beneficial, balanced trade agreement. Further, India has unveiled a 6-point plan aimed at fostering a stronger economic partnership with the European Union (EU).

The Six Broad Principles

Focus on common values of democracy, rule of law and independent judiciary.
Build a commercially meaningful, fair and equitable trade agenda, addressing trade barriers.
Exchange best practices and harmonizing standards to achieve zero defect and zero effect production capability.
Develop cutting edge technologies, secure critical raw material supply chains and build resilient supply chain.
Cooperation in trade and sustainable development conforming to Common But Differentiated Responsibility.
Partnership in mutual growth and development.

FTA 2.O

TA 2.0″ refers to a new phase of negotiations between India and the European Union for a Free Trade Agreement. This term indicates a revised and more ambitious approach compared to past talks, which failed after prolonged discussions. The “2.0” version aims to be more balanced, equitable, and mutually beneficial, addressing both global and regional trade challenges with a focus on creating a commercially significant agreement that benefits both parties.

PHASES OF INDIA-EU RELATIONS

Stage	Description
1. Early Diplomatic Engagement (1947-1970s)	– Post-Independence India engaged in diplomacy with European countries, including the UK, France, and Belgium. – India focused on multilateralism, and its trade and economic relations with Europe were initially limited.
2. 1980s-1990s: Evolution of Trade and Engagement	– India began pursuing economic openness with liberalization starting in the 1980s, boosting trade with European countries. – The EEC (European Economic Community) formed the basis for increased cooperation. – 1994: India-EEC Cooperation Agreement formalized engagement in political, economic, and cultural fields.
3. The Turn of the 21st Century: Strategic Partnership & Economic Cooperation	– The 1991 economic reforms in India led to rapid economic growth, including increased trade with the EU. – In 2004, the India-EU Strategic Partnership was formalized, fostering diplomatic, economic, and social cooperation.
4. 2000s: Trade Growth and FTA Negotiations	– India and the EU saw rapid economic integration in trade, with the EU becoming one of India’s largest trading partners and investors. – The Free Trade Agreement (FTA) negotiations began in the early 2000s with the objective of improving economic ties.
5. 2010s: Joint Efforts on Global Issues	– India and the EU cooperated on global challenges, including climate change, terrorism, and UN peacekeeping efforts. – India received EU support in securing a permanent seat in the UN Security Council. – Both focused on sustainability, renewable energy, and clean technologies, notably under the Paris Climate Agreement in 2015.
6. Recent Trends (2020-Present): Strengthening Ties Amid Global Challenges	– Growing cooperation on green energy, digital transformation, and vaccine production post-COVID-19. – The EU’s Green Deal and its focus on technology align with India’s goals. – Collaboration strengthened on strategic security issues, notably in the Indo-Pacific region, amid increasing global challenges.

PAINPOINTS: INDIA-EU FTA ??

Issue	EU’s Demand	India’s Concern
1. Tariff Barriers & Market Access	Lower tariffs on automobiles, wines, spirits, dairy.	Greater access for textiles, leather, agriculture facing EU’s tariffs & non-tariff barriers.
2. Investment Protection & Dispute Resolution	Strong Investor-State Dispute Settlement (ISDS) mechanism.	Prefers state-to-state dispute resolution to avoid lawsuits from corporations.
3. Intellectual Property Rights (IPR)	Stricter patent protection, especially in pharmaceuticals.	Protecting generic drug industry; avoiding evergreening of patents.
4. Labor & Environmental Standards	Binding commitments to ILO labor laws & environmental norms.	Fears these could become trade barriers affecting domestic industries.
5. Services & Mobility of Professionals	No major concessions on visa & work permits for Indian IT professionals.	Wants easier movement for skilled workers in IT, healthcare, financial services.
6. Agriculture & Dairy	Easier access for EU dairy & farm products to India.	Protection of Indian farmers from EU’s highly subsidized agriculture.
7. Geographical Indications (GI) & Standards	Recognition of more EU GIs (e.g., Champagne, Feta cheese).	Recognition of Indian GIs (e.g., Basmati rice, Darjeeling tea).
8. Data Protection & Digital Trade	Compliance with GDPR and EU’s data localization rules.	Concerns about impact on IT & e-commerce sectors.
9. Brexit Impact	New trade dynamics post-Brexit.	Adjusting strategy for separate FTAs with UK & EU.

CHALLENGES IN INDIA-EU RELATIONS

Challenges	Explanation	Examples
Geopolitical Differences	The EU envisions a comprehensive partnership, while India prioritizes strategic autonomy and avoids deep alliances.	– India’s neutral stance on Russia’s invasion of Ukraine, contrasting with the EU’s sanctions against Russia. – Different approaches to China.
Economic and Trade Barriers	FTA negotiations between India and the EU have faced delays due to disagreements on various issues, such as intellectual property and labor/environmental standards.	– Stricter EU intellectual property norms conflict with India’s focus on generic pharmaceuticals. – Disagreements on the Carbon Border Adjustment.
Defence and Strategic Divergences	India’s dependence on Russian defense systems limits deeper collaboration with Europe in military technology. EU-India defense ties lag behind those with the US or Russia.	– Projects like submarine collaborations with France and C-295 Aircraft with Spain are exceptions. – Russia supports joint defense manufacturing.
Technology and Innovation Gaps	India focuses on affordable technology, while Europe emphasizes sustainability and advanced manufacturing. Lack of coordinated response hampers joint technological progress.	– Competition with China’s dominance in emerging technologies like AI and Quantum computing. – Lack of coordination between India and the EU.
Structural Barriers	Divergences among EU member states complicate a unified foreign policy approach toward India, leading to fragmented and ineffective collaboration.	– Differing foreign policy priorities and interests across EU member states affect the consistency and strength of their engagement with India.

NEED FOR STRONG INDIA-EU RELATIONS

Countering Authoritarianism: India and the EU, both democracies, face pressure from authoritarian regimes like China (for India) and Russia (for the EU). Strengthening ties would help create a united front defending democratic values and countering autocratic expansionism.
Economic Growth: An FTA between India and the EU would boost trade and investment. With the EU as the largest economic bloc and India projected to be the third-largest economy by 2030, they offer mutual benefits such as market access, tech exchange, and alternative supply chains to reduce dependency on China.
Technological Collaboration: India’s tech innovation and the EU’s R&D capabilities can drive initiatives in AI, quantum computing, biotech, and space, countering China’s dominance. The EU-India Trade and Technology Council (TTC) can align strategies on emerging technologies, boosting cybersecurity, green tech, and clean energy. India’s sunrise sectors can also revive manufacturing in Europe, benefiting both.
Environmental Action: India and the EU can lead global climate action with initiatives on clean energy, carbon reduction, and sustainable development, utilizing India’s renewable potential and the EU’s environmental leadership. Joint investments in green technologies like solar power, electric vehicles, and sustainable agriculture can contribute to global sustainability.

WAY FORWARD

Unity Against Authoritarianism: India, Europe, and the US can unite to combat rising authoritarianism, using platforms like Democracy Summits to address global challenges.
Leveraging the TTC: The EU-India Trade and Technology Council (TTC) offers an opportunity to align technology goals and foster innovation in key sectors, similar to the US-India initiative on emerging technologies.
Strategic Economic Partnership: Beyond an FTA, India and the EU can explore joint ventures in sectors like pharmaceuticals, technology, renewable energy, and critical raw materials.
Trade Agreements: The EU could sign an agreement with India similar to the India-EFTA Trade and Economic Partnership Agreement (TEPA) to promote free trade and economic integration.
Defense Cooperation: India’s defense partnerships with the US, Russia, and the Quad can be complemented by EU investment in India’s defense sector and advanced technologies for regional security.

#BACK2BASICS: INDIA’S ECONOMIC DIPLOMACY ELEMENTS

Element	Description	Examples & Initiatives
Attracting Investments & Promoting Exports	Enhancing global competitiveness through FDI liberalization, ease of doing business, and manufacturing incentives.	Make in India, PLI schemes, Atmanirbhar Bharat, USD 81.97 billion FDI (2020-21).
Mobilizing Finances for Partner Countries	Extending financial aid and credit lines to developing nations to strengthen economic ties.	India-UN Development Fund ($150 million), International Solar Alliance (ISA), Lines of Credit (LoCs).
Building Support for International Rule-Making	Influencing global economic rules by engaging in multilateral institutions like WTO, UN, WHO.	TRIPS waiver for COVID-19 vaccines, Peace Clause at WTO, Leadership in G77 & South-South Cooperation.
Economic Sanctions & Strategic Autonomy	Selective use of economic sanctions while maintaining independent foreign policy.	Revoked Pakistan’s MFN status (2019), Avoided sanctions on Russia despite G7 pressure.
Financing Through Multilateral Platforms	Engaging with global financial institutions to fund development projects in partner countries.	ADB, BRICS NDB, World Bank, Infrastructure financing in Africa & Indo-Pacific.
Bilateral Development Aid & South-South Cooperation	Strengthening economic ties through grants, concessional loans, and technical cooperation.	India-Africa Forum Summit, Capacity-building programs, Agricultural & IT support to African nations.
Trade Negotiations & Market Access	Expanding trade partnerships through FTAs while protecting domestic industries.	India-EU & India-UK FTA talks, RCEP withdrawal due to concerns over China’s dominance.
Leveraging Soft Power for Economic Gains	Using India’s cultural and technological strengths to boost diplomatic influence.	Vaccine diplomacy (Covaxin exports), WHO Global Centre for Traditional Medicine, Yoga Diplomacy.

CHALLENGES IN INDIAN ECONOMIC DIPLOMACY

Challenge	Details	Specific Example Explaining the Challenge
Declining share in Global Value Chains (GVCs)	India’s merchandise exports have been declining in labor-intensive sectors like textiles, gems & jewelry, and leather due to high logistics costs, stagnant manufacturing growth, and lower FDI inflow.	Despite being in proximity to ‘Factory Asia,’ India is less integrated into GVCs than Bangladesh and Vietnam. India’s logistics costs are triple that of China and double that of Bangladesh.
Poor implementation of development projects & regional discrimination	India’s Lines of Credit (LoCs) and development aid suffer from slow disbursal, delays in project completion, and are focused mainly on neighboring countries, neglecting regions like Africa.	India has committed $2 billion for development projects in Africa, but delays in execution and funding have affected India’s credibility as a reliable development partner.
Inability to gather majority support at multilateral platforms	India faces difficulty in pushing trade reforms at WTO, UN, and WHO due to opposition from developed nations and lack of support from other developing countries.	India’s demand to review the WTO moratorium on custom duties for digital goods (which causes a $10 billion annual loss, mostly borne by developing nations) was extended further despite India’s objections.
Engaging with China	India struggles to balance economic and geopolitical interests with China, especially in South Asia and the Indo-Pacific, while also relying on China for critical imports.	Despite border tensions, India imports nearly 70% of its pharmaceutical raw materials (APIs) from China, making it difficult to fully decouple from Chinese supply chains.
Lack of a clear development cooperation strategy	India lacks a well-defined approach to specific global development goals like food security, health security, and clean energy, leading to uncoordinated aid efforts.	Unlike China’s Belt and Road Initiative (BRI), India does not have a coherent global economic strategy, making its aid distribution less visible and less influential.
Compartmentalized bureaucratic structure	Poor coordination between ministries and businesses creates inefficiencies in integrating economic and strategic goals.	There is no single centralized agency handling India’s economic diplomacy, leading to fragmented efforts in trade negotiations and foreign aid programs.
Emerging issues in global trade	Rising protectionism, weakening of WTO, preference for bilateral over multilateral agreements, and anti-globalization sentiments are affecting India’s trade ambitions.	The Appellate Body of WTO is non-functional due to the US blocking new appointments, making dispute resolution difficult for developing countries like India.
Emerging technologies & Fourth Industrial Revolution	India must adapt its economic diplomacy to integrate AI, 5G, digital trade, and green technologies into global governance.	India lacks a dominant role in shaping global AI and data regulations, unlike the US, EU, and China, which are setting the standards for digital trade and cybersecurity.