Trade deal as the grammar for closer India-Europe ties

The case for an FTA between New Delhi and Brussels has never been so strong

- Sreeram Chaulia

When economic warfare and weaponisation of trade are in vogue, what is the recourse for affected players? The commonsense strategy is to diversify and reduce overdependence on any one partner to offset vulnerabilities. Fresh rounds of proactive economic diplomacy between the European Union (EU) and India for speeding up the conclusion of the long-delayed Free Trade Agreement (FTA) can be understood in this context.

Given the market turmoil and unpredictability unleashed by the trade wars of the United States (US), Brussels and New Delhi are jogging with renewed determination to deepen their economic integration for stable, steady and mutually beneficial gains. Studies estimate that the EU-India FTA could raise India’s Gross Domestic Product (GDP) by 1.3% annually while the EU will enjoy a booster shot of 0.14% to its annual economic growth.

Freer trade with the EU can turbocharge India’s economy to gallop at above 8% per annum. Despite conciliatory messaging from US President Donald Trump regarding an impending trade deal to settle the row with India, in the worst-case scenario of maximal American tariffs of 50% on India remaining in place and shaving off 0.5% to 0.6% of India’s GDP, the FTA with the EU can cushion the blow.