The good news first: The sense of strategic apathy toward India that long prevailed in Germany has given way to a veritable India craze. In some political and business circles it seems that only India as an export market can haul German industry—or even European foreign policy—out of crisis.
What has certainly helped is the free trade agreement between the EU and India concluded in January. It marks a victory for the European Commission that few would have thought it capable of. The negotiations had dragged on for nearly two decades with interruptions, to the extent that the process became something of a running joke in Brussels. The fact that the deal was signed earlier this year is a symbolic success for Ursula von der Leyen’s “geopolitical Commission”—even though particularly sensitive agricultural and dairy products were largely excluded from liberalization, and ratification is still pending following the conclusion of negotiations.
This breakthrough wasn’t just down to Europe’s persuasive powers; geopolitical shifts played a major part as well. Deeper cooperation with the United States—which had long been a priority for New Delhi—became marred by political uncertainty due in part to the new amiability of US policy toward Pakistan. Europe seized the opportunity. Together with the defense partnership that was also announced, the agreement marks a new, less ideological, and more interest-driven quality of relations between the EU—one of the world’s largest economic blocs—and an ambitious India, the world’s most populous country with a growing middle class and solid growth rates. The two sides have also grown closer in their views on the US and China.
A Fundamental Truth
So, there’s no doubt that this partnership offers great opportunities. But the enthusiasm should not obscure a fundamental truth: India is not an easy partner for Germany and Europe, and it won’t be in the future either.
New Delhi traditionally avoids formal alliances, tends to cultivate multiple partnerships, relentlessly pursues its own interests, and—with regard to Russia, for example—adopts different foreign policy positions than Europe. India also poses economic challenges: It is bureaucratic, reflexively protectionist, and self-assuredly focused on its own advantage and on strengthening national industrial capacities. There are historical reasons for this: Colonialism and the Western-dominated Industrial Revolution reduced India from a position of great strength—experts estimate that the Indian subcontinent accounted for over 20 percent of the global economy around 1700—into a developing country.
Now that the next technological revolution, driven by AI and related technologies, is gaining momentum, India is determined to avoid a repeat of such a trauma. The country aims to return to its self-proclaimed status as a center of civilization and global power in the coming decades through technical excellence and the expansion of digital and physical infrastructure, supported by a young and growing population. In the Stanford AI Index, India currently ranks far ahead of Germany and other European countries in the overall assessment of AI capabilities.
Nevertheless—or perhaps precisely because of this—Europe needs India, and India needs Europe: as a counterweight to its politically risky and increasingly one-sided economic dependence on China, as well as in areas such as defense cooperation, green technology, raw materials, global standards, and maritime security. India’s demographic burden is both a curse and a blessing. Should AI displace jobs in the future—particularly in the service-intensive sectors that are crucial to the country—India’s interest in migration and mobility partnerships is likely to grow further. When it comes to digital government reform, on the other hand, Germany has a lot to learn from India.
Underpin the Euphoria with Honesty
According to a study by the Kiel Institute for the World Economy, the EU-India trade agreement could increase the European Union’s annual economic output by around €22 billion. However, it must also be noted that Germany has lost relative market share in India in recent years. The automotive sector illustrates the challenges: European manufacturers currently account for less than 3 percent of a market dominated by Maruti Suzuki, Hyundai, Tata, and Mahindra. Even falling tariffs won’t change that overnight. The market is cost-sensitive but also tech-savvy; charging premium prices for yesterday’s technology is hardly a recipe for success.
The challenge now is not to dampen this newfound enthusiasm for India, but to ground it in honesty—especially regarding economic expectations, where plans are too often based on an idealized vision rather than the realities of the Indian market. This is precisely why Europe’s policy toward India needs a new compass that is oriented toward positive realism. In concrete terms, this means an honest management of interests rather than wishful thinking, coupled with a willingness to invest in the partnership reliably and for the long term.
Such honesty also means acknowledging that Germany will not be structurally competitive in large parts of the Indian market. It should therefore channel its resources more toward areas where it has potential: specialized machinery, defense technology, educational cooperation, and green technologies.
These areas should always be considered together, because the economy, security, and climate change are more closely intertwined than they appear at first glance. Accessible trade routes are a matter of security, and the expansion of renewable energy is not only relevant to climate policy but also to national sovereignty, which in turn touches on geoeconomic issues.
Ample Scope for More Cooperation
All areas of cooperation require a long-term focus and the willingness to adapt to local conditions. This approach should extend all the way down into the states, where even greater potential may lie dormant—rather than sending one delegation after another to the same tech hotspots in Bengaluru, Gurugram, and Hyderabad.
One underestimated factor is the diaspora. Within just a few years, the Indian community in Germany has grown to nearly 300,000 people. Indians are now among the fastest-growing immigrant groups—on average, they are highly qualified and, among full-time workers, have above-average incomes. There are downsides, too: In their quest for a better life, some fall into the clutches of criminal networks; and even in the tech sector, many complain of a glass ceiling when it comes to career opportunities. Furthermore, concerns are growing about political skepticism toward immigration in Germany, fueled by the continued rise of the far-right Alternative für Deutschland (AfD) party. Creating a genuine welcoming culture and retaining talent over the long term remains an unfinished task.
None of this, it should be said, relieves German security agencies of their duty to monitor relevant political developments within the diaspora. Canada and the United Kingdom show how quickly political tensions from India—including separatist movements and religious nationalism—can impact political realities abroad.
India has long since become a key player in regions of the world that are also strategically important to Europe. In the Middle East, in particular, opportunities are emerging for deeper cooperation, but the EU is barely taking notice of them: Nearly 10 million Indians live on the Arabian Peninsula, and several Gulf states are among Delhi’s most important trading partners; at the same time, India is currently expanding its strategic partnership with Israel and the United Arab Emirates (UAE).
A German Indo-Pacific strategy that focuses more strongly on concrete partnerships and shared interests in the western Indian Ocean would be more logical and possibly more effective than the ritualistic deployment of individual navy ships to the Far East. Major initiatives such as the India-Middle East-Europe Economic Corridor (IMEC)—launched at the New Delhi-hosted 2023 G20 summit—or even a joint initiative to find a diplomatic solution to the Middle East conflict, require groundwork. But a start would already be made by recognizing India as a relevant actor in the Middle East, and thus a potential partner.
The same applies to Africa, where existing development cooperation between the EU and India harbors untapped potential. In the South Caucasus as well—where India, alongside France, is one of Armenia’s most important new defense partners—the scope for cooperation is far from exhausted.
It’s true that from Germany’s perspective, India is not always an easy partner within international organizations such as the World Trade Organization or the United Nations Climate Change Conference (COP). But wise policymaking should identify common ground rather than just focus on what divides us. A de-dollarization that primarily strengthens China’s financial and geopolitical position is just as detrimental to the common interest of India and the Europeans as the global rise of unregulated cryptocurrencies, which, from the perspective of Delhi and European governments, could exacerbate issues of state monetary and financial sovereignty.
Working with India—and Understanding It
The formula for a new model of interstate cooperation has yet to be found. It should be guided by two principles: upholding the Westphalian principle of mutual non-interference and a fundamental commitment to universal human rights, as formulated in the 1975 Helsinki Final Act. The interest in non-interference is mutual: Due to its colonial history, India is sensitive to anything perceived as external meddling; and in Germany, too, the protection of national sovereignty is a top priority in the face of hybrid threats from Russia and elsewhere.
India aims to be a power center in its own right and views fixed alliances with suspicion. This also explains the apparent contradiction that Delhi’s crude oil imports from Russia are rising while its dependence on Moscow for military equipment is declining. India values and makes use of flexible, minilateral formats—so why not establish more active and sector-specific formats that include partners such as Japan, Australia, South Korea, or the UAE?
A better German policy toward India requires expertise. Yet the basic knowledge of India and South Asia in German political circles, the government, and think tanks remains rather limited. Unlike the Mercator Institute for China Studies, there is no comparable large, policy-oriented institution that focuses specifically on India and South Asia. While investment in India-related research is increasing, it has so far been concentrated primarily on networking. Australia has illustrated what can be done: The country has learned the lessons of a relationship long marked by disinterest and is now regarded as a model thanks to significant investments in expertise. The newly established India Center at the German Council on Foreign Relations can help close an important gap in expertise here in Germany.
Only if we can better understand and interpret each other’s intellectual, historical, and social contexts, diplomatic nuances, and political systems, and thereby open up opportunities for political action, can the partnership with India become more than just another missed opportunity.
—Translated from the German by David Crossland
Leo Wigger is the head of the German Council on Foreign Relations’ (DGAP) new India Center.
