Anchal Vohra is a Brussels-based international affairs commentator. On a smog-filled day in New Delhi, I watched as a few German cars struggled to navigate a massive traffic jam. A British SUV was also in the mix, trailing not so far behind. Last year, these foreign cars accounted for only 0.1 percent of India’s imports, with Germans in the lead and the British coming in a near second. However, British businesses have gained an edge ever since the U.K. and India inked a free trade agreement earlier this year, with India finally lowering its protectionist guard. Once this deal fully comes into effect, overall bilateral business is expected to grow by more than 50 percent in about a decade-and-a-half, as New Delhi slashes its car tariffs from 100 percent to 10 percent, and its tariffs on scotch from 150 percent to 40 percent over a period of 10 years — all despite the cost to its domestic industries. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. The EU, meanwhile, remains the single largest market in the world, with a much higher chance of growing its exports to a country packed with over 1.46 billion consumers. Yet, negotiations between New Delhi and Brussels are forever hitting roadblocks, even as negotiators shuttle between the two capitals to get a deal across the finish line — a deadline that’s now been postponed to Jan. 26. And as these talks continue, the bloc could stand to learn from the flexibility of its former member. According to an Indian official in New Delhi, granted anonymity in order to speak freely, the biggest barriers to an agreement are currently the EU’s insistence on greater market access in the politically sensitive agriculture sector, and its insistence on a carbon tax under the Carbon Border Adjustment Mechanism (CBAM). On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. In contrast to this rigidity, India’s concessions in its deal with the U.K. emerged from the flexibility it was granted in the agriculture sector, which was largely insulated from British products, the official said. “For all its faults, [the U.K.] understands India and Indians better.” Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. Back in 2021, farmer protests even forced Prime Minister Narendra Modi to withdraw agricultural reforms and apologize. In fact, I have been told by former Indian officials and experts that the U.S. tariffs on India weren’t punishment for the country’s purchase of Russian oil, as Trump has claimed, but rather for its refusal to let U.S. food products flood the country. Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. | Jagadeesh Nv/EPA “The interests of our farmers are top priority. India will never compromise on the interests of its farmers, dairy farmers and fishermen,” Modi had said at the time. But these same differences now threaten the EU-India relationship before it even properly takes off. “The Europeans could learn from the British,” the Indian official noted. “They excluded dairy, chicken and apples from the deal,” he explained, listing products particularly important to India. “In exchange, we let them bring in salmon, cod and lamb.” He also alluded that India could consider dropping tariffs on cars and wine if the bloc kept out of agriculture: “In liquor, luxury cars and wine, there is always room, since that doesn’t affect our most vulnerable people.” Instead of any such changes,, however, India is now growing peeved by what it sees as last-minute pressure tactics by Brussels. Just this month, the EU decided to “limit rice imports from India” and other Asian countries to the benefit of domestic rice growers and millers. And the bloc’s unexpected decision to spike tariffs on steel imports outside its quota to up to 50 percent has rattled Indian negotiators. New Delhi was already opposed to the EU’s incoming carbon tax, believing it would make its steel exports uncompetitive. The Secretary of India’s Ministry of Steel Sandeep Poundrik described the European carbon tax as a bigger threat to Indian exports than Trump’s tariffs. On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. | Piyal Adhikary/EPA Moreover, some experts like former trade negotiator for India Sangeeta Godbole argue the EU stands to gain more from an FTA whereas India stands to lose if the carbon tax provision isn’t reconsidered. “Nearly 80 percent of Indian exports to the EU even now face miniscule tariffs below 1 percent,” she noted recently, demanding India shield exports “from excessive environmental rules” the EU is trying to impose. To that end, the country has decried the bloc’s tax on carbon intensive imports via CBAM as a violation of the Common But Differentiated Responsibilities (CBDR) principle, which doesn’t hold developing countries equally responsible for climate change due to differences in historical contributions and the state of their economic development. And here, too, India argues, the understanding with the British could be emulated. Although it failed to gain an exemption on the U.K.’s version of the carbon tax, India has reserved the right to retaliate if the FTA’s benefits are negated by this tax. For its part, the EU claims the carbon tax is intended to encourage the use of clean energy in heavy polluting industries. And as Commissioner for Trade Maroš Šefčovič said back in September: “We also need an understanding from the Indian side that we also have our constituency, we also have our audience” to consider — especially after the farmer protests over the recent deal with Mercosur nations. Meanwhile, the EU is also concerned about whether a deal with India might end up benefiting China. The bloc is desperately trying to reduce its dependence on Beijing in strategically important sectors and hoping India could replace it, but India itself is heavily reliant on China as well — for example, nearly half of the components in Indian semiconductors are imported from there. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. | Divyakant Solanki/EPA However, speaking with a highly placed EU insider who was granted anonymity, I learned the bloc is now ready to make concessions, offering to jointly manufacture cars to encourage India to lower its tariffs, to leave out access to certain agricultural products, and to possibly even relent on garment duties. And last week, negotiators went through sector by sector once more, trying to get a better deal for their domestic industries, trying to keep the balance sheet even. The truth is, India — home to a large number of people living below the poverty line despite its rapid economic growth — needs an FTA with the single largest market to attract foreign investment. But the EU needs India too.

The European Union’s top diplomat asked her counterparts in India and Pakistan to deescalate Friday amid fears of a military conflict between the two nuclear-armed nations. “Rising tensions between India and Pakistan are alarming. I urge both sides to show restraint and pursue dialogue to ease the situation,” the EU’s High Representative Kaja Kallas said, adding she said as much to Indian Foreign Minister Subrahmanyam Jaishankar and Pakistani Foreign Minister Ishaq Dar. The latest rift in the decades-old feud between India and Pakistan started on April 22, when Islamist militants massacred 26 people in Pahalgam, a well-known tourist destination in the Indian-administered region of Kashmir. Both India and Pakistan control parts of Kashmir and claim sovereignty over the entire region. The gunmen, who New Delhi has accused Islamabad of supporting, reportedly targeted Hindus, who make up the majority of the Indian population. India has since expelled Pakistani diplomats, suspended a crucial water treaty and canceled visas for Pakistani nationals, with Pakistan responding in kind, and minor skirmishes have erupted along the frontier. A Pakistani minister claimed this week that India was planning a military attack. The United States has also urged both countries, which have warred with each other before — most recently in 1999 — and have nuclear arsenals, to defuse tensions. European Commission President Ursula von der Leyen led a delegation to India in February to discuss a long-awaited trade deal between the bloc and New Delhi. After the attack in Pahalgam, she sent condolences to “every Indian heart” and vowed in a post on X, “Europe will stand with you.” 

Anchal Vohra is a Brussels-based international affairs commentator. European Commission President Ursula von der Leyen beamed as she stood next to Indian Prime Minister Narendra Modi. The two leaders had just tasked their respective teams with ironing out decades-long differences to finalize a Free Trade Agreement (FTA) — first discussed in 2007 — by the end of this year. It is “the largest deal of this kind anywhere in the world,” von der Leyen declared. “Surprise us.” The impetus to push the deal forward appears to be the result of an EU scramble to find alternative markets, as their closest ally across the Atlantic declares a trade war. With U.S. President Donald Trump threatening tariffs against Europe almost as soon as he took office, von der Leyen first signed a long-controversial deal with the Latin American Mercosur bloc, and then looked east toward India. “We both stand to lose from a world of spheres of influence and isolationism. And we both stand to gain from a world of cooperation and working together,” she said during her February visit to New Delhi. And with a population of more than 1.4 billion people, India offers a vast market for European goods and services, a manufacturing base it could invest in and nurture to counter China, and — crucially — a vast reserve of human capital to utilize. Back in 2023, the EU had prepared an action plan to lure foreign workers and meet bloc-wide shortages in 42 occupations. And provided their qualifications are recognized and visa processes made easier, Indian citizens are now poised to plug these gaps. The Indian community has already made a name for itself in the technology, health care and hospitality industries in most of the West. Indian doctors and nurses are highly sought after in the U.S. and the U.K.; they are an attractive hiring pool for English-speaking hotel and restaurant staff and seasonal tourism workers; and Indian techies have become some of the biggest names in the game. Sitting in his office, India’s EU envoy Saurabh Kumar told me that if Europe is interested, India has skilled and talented manpower that could match the bloc’s needs through structured, legal and transparent frameworks. “India would be very happy to provide skilled manpower to Europe,” he said. “But at the end of the day,” how and where they want to attract manpower from “is Europe’s decision.” But as the continent tilts to the right and its politicians find it hard to explain an influx of refugees from war-torn countries in the Middle East — a stance often rooted in Islamophobia — the Indian government is actively trying to present itself as a reasonable partner. It has even sweetened the deal by agreeing to repatriate those who illegally cross into Europe. For example, India has signed several Migrant Mobility Agreements, most recently with Germany, Italy and France. And while these agreements are designed to enhance opportunities for Indian students and professionals, they also ensure those who arrive without proper documentation return home.  There’s also a growing push to empower India to produce semiconductors and other products that would help secure supply chains controlled by China, as well as a possible partnership in the production of green hydrogen. | Manjunath Kiran/AFP via Getty Images Under the framework with Italy, Indian students can gather initial professional experience after completing academic or vocational training in the country, and they may be granted temporary residence for up to 12 months. The two countries also agreed on quotas for seasonal and nonseasonal workers for the next two years, so as to benefit Indian citizens suited for jobs in hospitality and agriculture, as well as Italian employers short on manpower. Meanwhile, Article-5 of a recently inked India France Migration and Mobility agreement allows for the return of persons in “irregular situations” once their “nationality is conclusively established.” “If there are Indians without proper documents,” Kumar explained, “I think our foreign minister has already mentioned that once the nationality has been established … we will take these people back.” And that is music to the ears of European politicians who want to pursue controlled migration with embassy-issued visas, while meeting the demand for labor in an aging continent. According to Sita Sharma, an independent consultant working as a senior advisor to the Ministry of Skill Development and Entrepreneurship of the Government of India, currently over 600 million people in the country are between the ages of 18 and 35. Comparatively, the median age in Germany is 45, with about 14 million in that age group. The agreement between Berlin and New Delhi allows “qualified young Indians to gain professional experience, study, start vocational training, or work in Germany,” Sharma noted, mentioning the agreement also theoretically proposes “bilateral placement agreements between the German Federal Employment Agency and Indian state or national level parties, particularly in healthcare, hospitality, mechanics, and electrical work.” However, she highlighted Germany’s low ambition, with only an “exchange of 3,000 workers annually” so far. But now, as work to finalize the FTA intensifies, both Brussels and New Delhi are in a mood to make concessions.  It appears India may finally have the stomach to reduce tariffs — as high as 100 percent or more on cars, wine and whiskey — while some in Europe have been sympathetic regarding India’s constraints around opening its agriculture sector to European imports. There’s also a growing push to empower India to produce semiconductors and other products that would help secure supply chains controlled by China, as well as a possible partnership in the production of green hydrogen.  “India has a very, very forceful decarbonization agenda. If we want to be serious about shutting down coal-fired power plants in the world, no better place to start than India,” Jacob Kirkegaard, a senior fellow at Bruegel and a non-resident senior fellow with the Peterson Institute for International Economics, told POLITICO. And while India has previously objected to the EU’s tax on carbon-intensive products such as steel, and accused Brussels of protectionism in the name of clean industrial growth, it now harbors hope of working around that by highlighting its commitment to renewable energy and to meet its net zero target by 2070. Kirkegaard believes the key hurdle from a European perspective will be market access: “India is essentially in a very old-style protectionist economy. It’s really about dismantling a lot of that,” he said. “But, at the same time, if you want to significantly increase legal migration, employment-based migration to the EU — which I think many countries would like — you have to do it with India,” he said. “That’s where the people are.”

India and the European Union will push to finalize a free-trade agreement this year, European Commission President Ursula von der Leyen said on Friday.  In a keynote speech during her two-day visit to New Delhi, von der Leyen said a closer alliance with India would be “a cornerstone of Europe’s policy in the years and decades to come,” built on enhanced cooperation on trade, technology, security and defense. “A free trade agreement between the EU and India would be the largest deal of this kind anywhere in the world. I am well aware it will not be easy. But I also know that timing and determination counts, and that this partnership comes at the right moment for both of us,” von der Leyen said after talks with Indian Prime Minister Narendra Modi.  “This is why we have agreed with Prime Minister Modi to push to get it done during this year. And you can count on my full commitment to make sure we can deliver.” Von der Leyen is leading the new Commission’s first visit to India, as the EU seeks to keep New Delhi onside amid rising geopolitical tensions with the United States and China.  India and the EU resumed talks on a free trade agreement in 2021 after talks collapsed in 2013. While progress has been slow since then, both sides now appear determined to strengthen ties to counter America’s tariff threats and China’s assertive trade practices. Commission officials also joined their Indian counterparts for a second Trade and Technology Council on Friday, where they are expected to discuss cooperation on electric vehicle standards, artificial intelligence, semiconductors and telecommunications.