Eu–India: Questioning the Grey Areas of the Free Trade Agreement

In a context of a trade war between China and the United States and a general rise in customs duties introduced internationally by Donald Trump, the European Union (EU) and India concluded, on 27 January, an unprecedented free trade agreement which Ursula von der Leyen described as the “mother of all deals”. Nevertheless, to this day the agreement still contains many grey areas. What analysis can be offered of the negotiations surrounding this agreement? What does it reveal more broadly about the European Union’s positioning within India’s multi-alignment strategy? An overview with Charlotte Thomas, associate with IRIS’s Asia-Pacific programme and author of Pogroms et ghetto, les musulmans dans l’Inde contemporaine, Karthala, 2018.

What are the stakes of this agreement and what opportunities does it offer respectively to New Delhi and Brussels?

The structuring line to keep in mind is that, for Indian leaders, the EU represents a very important source of technology and investment. Conversely, India is perceived as an immense potential market of 2 billion individuals. That said, it is in fact difficult to assess the repercussions of the present agreement in an informed way. First of all, two things must be borne in mind: firstly, whatever it contains, this free trade agreement (FTA) will take five to ten years to be implemented, if it is to be implemented in full. At this stage, it has not even been signed yet. Secondly—and linked to this reality as far as the timetable is concerned—the content of the agreements has not yet been disclosed either in the press or even to Members of the European Parliament. We are therefore reduced to commenting on something we do not really know.

In addition to the “goods and services” component, the agreement includes three other parts: mobility; security and defence; and finally the strategic agenda. As regards the first section, by 2030, 99% of Indian exports to the EU and 97% of European exports to India will be exempt from customs duties, according to official press releases. We have a few fragments of information about the exports that will benefit from exemptions: wine, pasta, cars, chocolate, etc. for the EU; textiles, leather, sports articles, toys, precious stones, etc. for India. Several areas are excluded from the agreement, such as beef, soya and rice. However, this is not about “protecting European and Indian farmers”, as it has been presented: an examination of the facts leads to a different analysis. As far as India is concerned, Narendra Modi abolished, in December 2025, the guaranteed agricultural income that had existed in India for 20 years and had in particular ensured the survival of small farmers engaged in a subsistence economy. The Prime Minister is therefore buying time, but ultimately this “detour via Europe” could be used to privatise and liberalise the agricultural market as India’s major capitalist groups dream of doing, first and foremost Reliance, owned by the Ambani family, close to the Prime Minister and a major funder of his political party. Narendra Modi attempted this in 2020 and had to back down in the face of the largest social movement in history that his decision had triggered. He will return to it. And on steel, a major component of the deal for India, how will the EU ensure proper implementation of the border adjustment mechanism?

The content of the other three parts remains a mystery. Take the component dedicated to the mobility of Indian workers to the European Union. The Indian economy is structurally marked by high unemployment, which Narendra Modi has not brought to an end despite his commitments—which moreover explains the substitution of identity for the economy in his speeches. Unemployment is also high in EU member states, although labour-market structures are not comparable. However, wages, the cost of living and labour law have nothing in common across the two entities. Consequently, who will be concerned? What categories of jobs will be placed in direct competition even though 8,000 kilometres and an entire body of labour legislation separate them? Alongside the social issues of such dumping, at a time when climate disruption implies limiting air travel, one can also question the ecological legitimacy of such a mobility clause. The same applies to the “security and defence” components or the strategic agenda: we do not know what they contain.

Beyond the challenges this creates for analysis, the grey areas surrounding this agreement and the fact that it has not been made intelligible to the “general public” raise a democratic problem. It is therefore striking that the French and Indian presses relay their authorities’ discourse without critical distance. In our latitudes, beyond praising this “mother of all deals” that will enable the creation of a “common market of two billion people”—Ursula von der Leyen’s words—and repeating the few elements that have been disclosed and that would, on paper at least, go in the Europeans’ favour, the press says nothing about the other parts, even though we know they exist, nor does it ask what they contain or why, precisely, they are not being disclosed. On the Indian side, media coverage of this “deal” was short-lived. It was first replaced by the announcement of the 2026 budget at the end of last week, then by announcements made by Donald Trump. While this “deal” is even vaguer, since it is reduced to a simple tweet, it has prompted far more commentary than its European counterpart. The European Union in reality attracts little interest in India.

In what context was this agreement concluded? What are its limits?

We should avoid seeing the signing of this agreement as a strict “reaction” to the tariff policy implemented by Donald Trump towards the two parties involved, since this agreement has been under discussion for more than 20 years. However, it is undeniable that this diplomatic reality mattered in two ways: firstly, to find outlets according to neoliberal logic, by extracting oneself from protectionist dynamics; secondly, vis-à-vis the respective “public opinions”, by demonstrating political activism aimed at offsetting the humiliations inflicted by Donald Trump on Indians and Europeans. In fact, the US President’s reaction was immediate, since he attempted to regain the initiative the very next day by announcing a “deal” with Narendra Modi and a reduction in the astronomical customs duties (50%) to which India was subject.

However, the Indo-European agreement can in reality more readily be seen as a demonstration of self-organisation vis-à-vis China, on which both the Union and India are highly dependent. India moreover refused to join the Regional Comprehensive Economic Partnership (RCEP), a large market initiated by China and bringing together 15 Asia-Pacific countries.

This agreement is therefore not necessarily the most suitable format for responding to the challenges faced by the two parties. Heterodox economists show that free trade agreements have not, ultimately, enabled human development and the enrichment of the populations concerned. On the contrary, they lead to the impoverishment of those populations and the explosion of social models, as well as the economic and financial enrichment of large internationalised groups. The same hypothesis can therefore be made here: these agreements could primarily reward major capitalist actors on both sides, without addressing the structural employment and industrialisation problems faced by the Union and India.

On the European side, the Union is the second export market for Indian products, after the United States; but conversely, our exports to India represent only 2% of the total volume. In India, one of the structural problems of its economy is the low level of R&D among large internationalised companies in favour of rent alone—hence a sluggish domestic market.

Thus, rather than inventing new, innovative forms of cooperation capable of responding to these issues, or concerted negotiations on tariff barriers allowing strategic segments of agriculture or industry to be preserved, the European Union and India are recycling the same neoliberal recipes. Yet the effects of these are now clearly rejected by peoples, as illustrated by protests against Mercosur. Moreover, while the Indian government is increasingly xenophobic and authoritarian, the Union has abandoned any desire to defend human rights—or, at a minimum, to raise alarms and condemn such developments—in favour of trade alone.

Several innovative areas would lend themselves to ambitious partnership agreements: space strategy, given India’s ambitions and European competences in this field; the supply of medicines, as India is considered the “factory of the world” and the Covid-19 crisis showed the absence of a European strategy in this regard; or the protection of water, as the “Himalayan water tower” is already being affected by climate disruption even though it provides water for 40% of humanity, and while its climatic and social effects will undoubtedly be felt in Europe… Some of these issues were indeed mentioned, but without content or a timetable, in the form of vague, sweeping statements. It is regrettable not to show greater voluntarism in these areas which, potentially, would be more broadly beneficial to the population.

What place do Europe and France occupy in Narendra Modi’s multi-alignment strategy?

First of all, it must be clearly understood that the EU is only one partner among others for India, far from being privileged. Russia, China, the United Arab Emirates and the United States are more important. Moreover, while the EU is India’s second trading partner, not all European countries will benefit in the same way. For example, the removal of customs duties on automobiles serves German interests, given that Berlin is already New Delhi’s leading trading partner in Europe; Chancellor Merz was moreover in India a few days ago with Ursula von der Leyen and strongly pushed for the signing of the free trade agreement. Furthermore, India has always favoured bilateral exchanges with European countries rather than via the Union, an institution that the authorities find opaque, difficult to grasp and of little relevance. That said, France, the Union, and the countries that comprise it individually are all interlocutors within the framework of its multi-aligned policy, notably in its search for technology transfer—this dimension was moreover major in the sale of Rafales or in the contracts India has recently signed with Germany. In doing so, New Delhi hopes to attract foreign investment to compensate for its low volume of research and development (R&D). But despite the narrative of a close connivance between Emmanuel Macron and Narendra Modi, France cannot claim any privileged partnership. On the contrary: France’s trade balance with India remains clearly in deficit.