India's Economic Transformation and Prospects for EU-India Strategic Cooperation

Fremont, CA: India has become the world’s fourth-largest economy, with GDP now exceeding USD 4 trillion. This milestone reflects significant progress since independence. Unlike other Asian economies that rely on exports, India’s growth is primarily driven by domestic demand, with private consumption making up about 60 per cent of GDP. A strong demographic advantage supports this trend, as approximately 700 million Indians are under 28. The expanding workforce is accelerating urbanisation and advancing the shift from an agrarian economy to higher-value industry and services.

India’s Economic Ascent and Strategic Autonomy

Although structural challenges remain, particularly in infrastructure, skills development, and regulatory efficiency, India’s economic momentum is strong. Growth is now driven by long-term productivity gains, labour market formalisation, and rising household incomes, rather than short-term fiscal or political measures. Consequently, the outlook is optimistic, with India positioned as a key driver of global economic growth in a fragmented geopolitical landscape.

​India’s evolving political and foreign policy reflects its growing economic confidence. Domestically, political discourse follows global trends of protectionism and nationalism, but policy decisions remain pragmatic. Indian leaders understand that sustained growth requires openness to trade, access to global markets, and ongoing international cooperation. Over the past decade, this pragmatism has led to a more assertive pursuit of strategic autonomy. Instead of aligning with a single power bloc, India increasingly defines its own positions, strengthening its role as an independent actor in a multipolar world.

​Strategic autonomy is most evident in security and defence. India remains one of the world’s largest importers of defence equipment due to its complex security environment and historical reliance on external suppliers, especially Russia. However, New Delhi has diversified its defence partnerships, expanding cooperation with the United States and European countries. This strategy aims to preserve flexibility, reduce risk, and enhance India’s ability to act independently on regional and global issues.

EU–India Relations: Trade, Climate, and Strategic Opportunity

Amid these developments, the long-negotiated EU–India Free Trade Agreement has regained momentum. Since talks began in 2007, progress has stalled due to differing development levels and economic priorities. Agriculture, steel, automobiles, services, and energy remain key points of contention. India aims to protect employment-intensive sectors and maintain policy flexibility for domestic development, while the EU seeks greater market access and regulatory alignment. Services and labour mobility, particularly for engineers, medical professionals, and accountants, are central to India's interests.

​Climate and energy policy add further complexity to the relationship. The EU’s Carbon Border Adjustment Mechanism poses challenges for Indian exports in energy-intensive sectors such as steel. India’s cautious stance on rapid decarbonisation reflects genuine energy security concerns stemming from its reliance on imported oil, gas, and coal. Although India supports climate action in principle, it prefers a gradual transition. The planned launch of a domestic carbon trading mechanism in 2026 marks progress toward regulatory convergence and may help reduce CBAM-related tensions over time.​

Beyond trade, there are significant opportunities for deeper EU–India cooperation. Joint efforts in energy transition, defence industry, technology and semiconductor partnerships, circular economy, and strategic connectivity projects such as the India–Middle East–Europe Economic Corridor highlight complementary strengths and shared long-term interests. Although progress may be gradual, continued engagement in these areas could strengthen a more resilient EU–India partnership in an increasingly multipolar world.