Dr. D.K. Giri
India concluded successfully the negotiations on a Free Trade Agreement (FTA) with European Union about a week ago. This was called “the mother of trade deals”. Again a couple of days ago, India signed a trade deal, though not FTA, with the United States, which is called the ‘father of all deals’. While both the deals mark a significant achievement for economic diplomacy of all the three contracting parties – India, the European Union and the United States – it is necessary for New Delhi to tread carefully on securing the commitments and expectations embedded in these two trade deals.
Why the trade deals in reference are significant for all the parties? The FTA with European Union should be hailed as a success simply because it could be concluded. Remember, the negotiations between India and the European Union lasted about two decades, beginning in 2007. The talks got stalled in 2013 and were seriously resumed in 2022. They were equally quickly concluded in January 2026. The concluding summit between India and the European Union was preceded by the state visit of two top leaders of the Union, the President of the Council, Antonio Costa and the President of the Commission, Ursula von der Leyen. Their visit was preceded again by the Chancellor Friedrich Merz of Germany, the most powerful economy of the European Union.
The main driver for the conclusion of FTA negotiation is said to be the American President Donald Trump. His disrupting style in conducting American foreign policy has prompted many countries for economic and geo-political realignment. Trump’s focus on MAGA – Making American Great Again – has ironically led his country to withdrawal and isolation. Trump withdrew from 66 international affiliations and diluted the most powerful security alliance, NATO which nudged the European Union to look for new allies and fresh initiatives in their economic and security policies. Such a shift in European Union’s strategic thinking led them closer to India resulting in the signing of the FTA.
The trade deal with the United States is significant as the bilateral relations between both the countries had nosedived in Trump’s second term, for various reasons. This downward development was a matter of worry for both Americans and Indians. A relationship which was steadily built over two decades was being torpedoed by Trump by his temperamental behaviour. The main grudge Trump was carrying was born out of New Delhi buying Russian oil despite Moscow continuing to militarily pound Ukraine after an outright invasion four years ago.
Whatever may have been the triggers for these trade deals, they are certainly solid foundations for taking the ties forward. Taking into account criticism of the deals, which are expected in any democracy, it is in order that we analyse these deals and sound caution to each signatory to make them work for the benefit of all stakeholders, not just for domestic political constituencies in each country. From my studies of India and European Union bilateralism since the Union began as European Economic Community in 1957, there were both structural impediments as well as operational issues which stemmed the growth of the ties.
On structural issues, both European Union and the Union of India suffered from a mismatch between their economic and political aspirations in their foreign policies. The European Union was mainly driven by their economic interest whereas India by political priorities. This seems to be changing as it should. The major reflection of this mismatch was EU’s growing trade with China and New Delhi’s pivot to USSR now Russia in lieu of the West – America and Europe.
On operational issues, India was consistently unable to meet the delivery commitments. In 1980s, European Economic Community had introduced a quota system for its various imports like textiles, garments, mangoes and so on. Indian exporters were not able to utilise the quota allotted to them. Again things might have changed. The other drawback Indian exports suffered from, was the quality. European standards are quite high in international market. In order to secure their standards, they used a Non-Tariff Barriers (NTBs). Since India’s international trade has been receiving a renewed focus by all political regimes, the quality should have improved. But the best way to maintain export quality is to demand quality products for domestic market and consumption.
Thankfully, both India and European Union are pursuing assertive foreign policies, especially in breaking the mould of international politics which was marked by bipolar competition. It was between USA and USSR after the Second World War through the Cold War until the disintegration of Soviet Union in 1992. Then, during the period of globalisation, it was USA and Sino-Russian axis. This is when Union of India and the European Union are seeking and striving for a multipolar world with multiple power points. I have been critical of this approach, treating it as a utopia not born by history. But, with Trump disrupting international economy and politics in a big way, a new geo-political system may not be ruled out.
On the US-India trade deal, it gives a strategic boost for bilateral ties. United States reduces tariffs on Indian goods from 50 per cent to 18 per cent, at least a 1 per cent lower than ASEAN competitors of India. India commits to import 100b USD worth of US goods annually for five years in energy products, aircraft, technology and agricultural goods. This seems a tall order as US exports of goods to India were roughly 42b USD in 2024. The structural bottlenecks, regulatory frictions, and sectoral constraints will likely to limit how quickly trade volumes can increase.
Secondly, China still looms over the bilateral equation between India and USA. Donald Trump has been seen courting both China and Pakistan in recent times. This will not secure the confidence of Indians. Third, Donald Trump remains as an unpredictable as ever. Indian leadership had decided to wait out Trump’s second term as was indicated by India’s NSA Ajit Doval to the Secretary of State, Mark Rubio.
At any rate, the trade deal is portrayed as bearing rich potential for geo-political dividends. This could be seen in India’s energy security, strategic realignment – strengthening Quad and India emerging as a reliable sourcing partner reducing US dependence on China and reshaping the balance of power in Asia. Handled carefully the deal’s impact could extend beyond trade, enhancing India-US strategic partnership and promoting global stability. As of now, the deal reflects India’s growing economic and geo-political importance with potential long-term implications for regional stability and global trade dynamics. All these will depend on New Delhi treading cautiously and dealing with Trump quite carefully.—INFA
(Copyright, India News & Feature Alliance)
New Delhi
5 February 2026
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