The strategic significance of the deal was reinforced by European Commission President Ursula von der Leyen, who said on January 21, 2026 at Davos that the EU was “on the cusp” of signing a trade agreement with India, giving the 27-member bloc a potential “first-mover advantage”.
Her remarks come as India’s trade talks with the United States remain uncertain and amid renewed tariff threats by the US, including a 50 per cent duty imposed on certain Indian goods since August last year.
According to Antonio Bartoli, Ambassador of Italy to India, such candid political signalling is unusual at this stage of negotiations. “Senior leaders usually avoid public optimism so close to the finish line. The fact that this was said openly suggests strong political backing on both sides,” he said.
For Europe, India represents a reliable democratic partner as economic ties with China are reassessed. For India, deeper integration with the EU offers strategic diversification at a time of unpredictable trade relations with the US.
“This is not just about hedging risk,” Bartoli added. “It is about choosing partners who believe in multilateralism and democratic values.”
Tariff cuts to long-term competitiveness
While the agreement would link two of the world’s largest markets, experts cautioned that its true value lies beyond tariff liberalisation.
“For Indian industry, this is not a routine trade agreement,” said Rupa Dutta, distinguished fellow at CRF. “It is being seen as a structural enabler for long-term competitiveness rather than just a way to increase exports.”
Based on consultations across sectors, CRF found that industry priorities centre on regulatory stability, predictability and clarity, which are critical as global trade becomes increasingly compliance-driven.