Berlin, September 2 The EU-India free trade agreement, concluded in January 2026, marks a pivotal moment in Germany’s evolving relationship with India. Yet, with negotiations having stretched over nearly two decades and punctuated by interruptions, the deal’s conclusion was as much a product of endurance as it was of diplomacy. The agreement, a symbolic success for European Commission President Ursula von der Leyen’s ‘geopolitical Commission,’ excludes sensitive agricultural and dairy products from liberalization, a concession that has left some observers questioning the pact’s full economic potential.
Geopolitical tides have shifted in recent years, with India’s traditionally strong alignment with the United States facing new uncertainties. The growing amiability of US policy toward Pakistan has complicated India’s strategic calculations, prompting a reassessment of its global partnerships.
In response, a defense partnership was announced alongside the trade deal, signaling a growing convergence of interests between Berlin and New Delhi. India, however, is no stranger to careful balancing. The country has long avoided formal alliances, preferring a web of partnerships that allow it to navigate complex global dynamics.
Its stance on Russia, for instance, diverges from that of Europe, underscoring the challenges of aligning interests across continents. Economically, India’s approach is equally distinct: bureaucratic, reflexively protectionist, and deeply focused on strengthening national industrial capacity.
This stance is rooted in history; experts estimate the Indian subcontinent accounted for over 20 percent of the global economy around 1700 before colonialism and the Western-dominated Industrial Revolution reshaped its trajectory. Now, India seeks to regain its status as a center of civilization and global power through technical excellence, AI, and infrastructure expansion. The Stanford AI Index places India far ahead of Germany and other European countries in overall AI capabilities, a fact that could reshape future collaborations.
A Kiel Institute for the World Economy study projects the EU-India trade agreement could increase the EU’s annual economic output by around €22 billion (approximately US$24 billion), a figure that underscores the deal’s potential despite its limitations. Germany, however, has lost relative market share in India in recent years. European manufacturers account for less than 3 percent of the automotive market, a space dominated by Maruti Suzuki, Hyundai, Tata, and Mahindra.
The article suggests Germany may need to focus on specialized machinery, defense technology, educational cooperation, and green technologies to find a foothold. It also notes that India’s interest in migration and mobility partnerships may grow if AI displaces service-sector jobs—an area where Germany could offer expertise.
As relations between Germany and India evolve, the path forward may involve learning from India’s own successes, particularly in digital government reform. For now, the focus remains on navigating a partnership that balances mutual interests with the realities of a rapidly changing global order.
