Germany’s outreach to India has grown in recent years. In 2024 alone, former Chancellor Olaf Scholz visited the country, taking a large part of his cabinet with him, and the government launched its Focus on India paper. These efforts have yielded results. A energy partnership sees the German government lending €10 billion for India’s green transition while leading German companies have invested in new operations in India and a raft of cooperation schemes are bringing 60,000 students to Germany and forging joint scientific collaborations.
The European Union has also identified India as a key future partner. European Commission President Ursula von der Leyen and Indian Prime Minister Narendra Modi in February set a deadline of the end of 2025 for concluding a trade deal, with negotiations having dragged on since 2022.
At both levels, strategists share a belief in India’s economic potential. A key cause for recent European efforts lies in concerns about China and its attempts to reshape global governance and dominate the important Indo-Pacific region. Western countries believe a stronger India could constrain China’s influence in the region. They also seek new trade partners amidst US tariffs and economic coercion.
A range of barriers on both sides have historically hampered relations, from bureaucratic inflexibility to a mutual lack of understanding. Another crucial challenge has been India’s constrained diplomatic capacity and the consequent competition for attention in New Delhi. During the first Trump and the Biden administration, relations with Washington had fast become India’s primary international focus.
The current downturn in India’s relations with the United States therefore represents an opportunity for Germany and the EU. Acting now will also symbolically demonstrate trustworthiness to the Indian government at a time when it has been pushed onto the back foot, enabling Berlin to broaden and deepen cooperation.
However, to take advantage, suitors such as Germany and the EU need to understand what the US partnership meant to New Delhi and how it worked. Key to the US’ efforts was a long-term bet on India that sought less immediate advantages for the US as a stronger India was calculated to be in Washington’s long-term interest.
The Breakdown of India-US Relations
Contrary to expectations in Delhi, US President Donald Trump’s actions have wrecked two decades of careful US-India diplomacy. First, trade negotiations starting in the early spring saw the US government forcefully pushing on areas that are political and culturally sensitive in India such as American meat-fed cows and agricultural protections. Trump’s tariffs on India were a further shock. Twenty-five percent tariffs were imposed whereas most economic competitors in the region, such as Vietnam and Bangladesh, received 20 percent.
Next came Trump’s claim to have orchestrated a ceasefire between India and Pakistan after four days of escalating conflict in May, even offering to solve the Kashmir border disagreement. This crossed a red line for the Indian government, which fiercely rejects any external mediation of relations with Pakistan, or intervention in the Kashmir border dispute. Delhi insisted the ceasefire was agreed bilaterally.
The downward spiral continued when Trump slapped India with an additional 25 percent tariff citing Russian oil imports whilst not sanctioning other major buyers like China, Japan, and Turkey. October’s sanctions on Russian oil will further constrain India’s ability to choose from whom to source energy.
There was also an outcry in September when the Trump administration decided to increase the cost of skilled worker H-1B visas. Seventy-five percent of them go to Indians. The remittances generated by these migrants, as well as the skills returnees brought home, have served India well. It also made the US highly attractive for students.
The Opportunities for Europe
The US-India reversal is seismic. The defining feature of Indian foreign policy in the 21st century has been the gradual growth of India-US relations, enduring political administration changes on both sides. India joined the US-led Quadrilateral Security Dialogue (“Quad”) alongside Japan and Australia, to coordinate Indo-Pacific security matters, while US intelligence reportedly supported the Indian military during Chinese border incursions, particularly in 2022.
No other country can replace all the capabilities provided by the US and therefore, New Delhi will seek rapprochement. However, Trump’s actions have damaged trust amongst Delhi’s foreign policy establishment, and the US’ higher tariffs are likely to remain, creating economic harm in India.
Whereas in the past, this might have triggered a drift toward isolation and autonomy, today it will likely lead Indian government strategists to double down on multi-alignment, the ambition to build deep relations with countries across different geopolitical divides. The most plausible scenario will see the Indian government decreasing controls on Chinese commercial flights, trade, and investment alongside the Modi administration asserting its “all weather” Russia friendship.
However, both relationships have limitations. China remains a strategic threat to India on its border and in its neighborhood. Russia is a technologically declining power whose economy and defense industry are being stretched by the Ukraine war. Germany, and Europe, have a window of opportunity to step in and replace capabilities that the US was providing.
What the Indian Government Is Looking For
Technology Transfer. India has long prized technology transfer to support its domestic development and rise to great power status. The US nuclear deal, and former President Joe Biden’s later Initiative on Critical and Emerging Technology (iCET) scheme mattered symbolically, with both demonstrating commitment to giving India access. Just as consequential was the US’ decision to designate India at the level of formal allies, similar to NATO members.
Germany and the EU do not have the same technology offer in computing, microelectronics, and AI. However, there is clear potential in machinery, engineering technology, and pharmaceuticals, and elsewhere. Public diplomacy matters: Policymakers in Berlin should consider if there is a deal with similar symbolic importance as the Indo-US Nuclear Deal as well as consider India’s place in their trade licensing regime.
Domestic Investment. To spur economic growth, the Indian economy requires major external investment in infrastructure, industry, and services, and European capital is an ongoing source for all three areas. Scaling up public investment could strengthen the Indian government’s recognition of this support, through the German development bank, KfW, or multilateral banks like the EIB and EBRD, and the EU’s Global Gateway Initiative.
Migration. With the aforementioned change to H-1B visas, many of skilled workers and students have been put off moving to the US, opening the door for Europe to establish itself as an alternative and address its own skills shortages.
Defense and Security. Besides the US and Russia, France and Isreal are India’s main established defense partners. However, New Delhi is upgrading and considerably expanding its military, while reducing dependence on Russia. Germany’s rearmament provides opportunities, but India will want its share of intellectual property and manufacturing in any defense deal. India’s large pool of engineers and defense tech start-ups in areas like drones and space offer strong potential for collaboration. Deeper security cooperation is less likely as Germany does not have the scale of deployable assets as the US and Berlin remains primarily focused on the military threat of Russia.
The Trade Deal
Indian governments have long viewed international trade suspiciously as a mechanism for exploitation by wealthier countries. Deep skepticism is backed up by politically-powerful farmers. However, Trump’s tariffs, alongside domestic economic challenges, are forcing Delhi to embark on a renewed trade push that includes restarted EU talks.
The recently-concluded UK-India trade deal offers a cautionary tale, with the first of many deadlines missed in 2022. Its completion required regular leader-level pressure and the UK conceding some key priorities, whether on tax exemptions for Indian migrants, access for UK accountants and lawyers, or on the timeline for a linked investment-finance deal.
Economic pressures provide hope for an EU-India trade deal but similar efforts of leader-level engagement and significant flexibility will be required to overcome barriers between two very different trade-policy cultures.
Learning Lessons from US-India Relations
Improving ties between the EU, including Germany, and India faces many barriers. Building productive working relationships between the governments has been difficult, given both sides’ bureaucratically-heavy systems.
What should be different this time? The US achieved its acceleration by placing a bet on India delivering long-term payoffs not by securing tangible short-term returns. Thus, technology exchange, diplomatic deals, and security collaboration were offered despite not bringing many immediate economic or geopolitical rewards. Rather, the Washington foreign policy community believed that a stronger India would contain China and help enforce an international system that serves the US.
Thus, the US gave India geopolitical space: Washington rarely questioned India’s partnership with Russia nor did it critique illiberal domestic politics. An alleged operation by Indian intelligence to assassinate US and Canadian citizens was dealt with behind closed doors. Despite frustrations over India’s diplomatic positions, or over barriers to the Indian market, successive Democratic and Republican administrations maintained the diplomatic campaign.
The current German government and EU officials may decide against such a bet on India. There are reasonable concerns about sharing technology, worries about Delhi’s proximity to Moscow and India’s domestic politics. Well-founded doubts also exist about the India’s economic transformation, whether industrialization will take off and high growth levels continue.
However, should they want to seize this opportune moment, European officials should remember that the premise to the US-India success was Washington’s long-term bet. It focused on what the relationship could become, rather than on what it was in the present.
Adopting such a long-term bet won’t be straightforward. It requires Brussels and Berlin to take a risk and a centralized orchestration of policymaking to ensure strategy is rolled out across the often-siloed arms of the state. The White House’s national security council was key in the US case and Germany’s equivalent is in its infancy. Germany’s coalition government system makes cross-government coordination harder. The EU’s multi-state model is an even greater challenge.
However, the current situation, whereby Trump has forced the Indian government into a corner on trade and oil imports, represents an outsized opportunity. A cooperation pact would speak volumes beyond its material policy detail, symbolically demonstrating that Germany and the EU are new partners that India can trust.
Barnaby Dye is a British Academy Global Innovation Fellow at the Germany Council of Foreign Relations (DGAP) and a lecturer at King’s College London.
