EU wants to join India’s economic boom but wary of one-sided trade deal: Director of Eurointelligence

India is emerging as a key partner for Europe, offering opportunities for trade and investment even as global uncertainty reshapes supply chains. Wolfgang Munchau, Director of Eurointelligence, told CNBC-TV18 that India “is the one uncontested trading partner” for Europe and is increasingly seen as a potential growth engine.

Munchau said India remains one of the few countries that still imports European products, at a time when Germany and other EU nations are seeking new markets. “There’s a lot of hope, certainly in Germany, but in the rest of the EU as well, on a free trading relationship with India,” he added, noting that India’s ambitious 8% growth target is taken seriously by many European businesses.

However, the Eurointelligence director cautioned that Europe is likely to approach trade negotiations carefully. He highlighted past experiences with China, where the EU initially ran trade surpluses but later faced challenges as China altered the balance. “I think this time, the EU will be less tolerant of this. This should not turn into a one-sided relationship,” Munchau said.

He added that while the EU is eager to participate in India’s economic boom over the next two decades, there could be challenges as it seeks to export machinery and industrial goods to India.

Munchau also touched on geopolitics, noting that Europe’s energy ties with Russia are in flux. While some pipelines are no longer operational and oil exports are down, parts of the EU remain dependent on Russian energy. Commenting on US President Donald Trump’s role, he said, “Trump is trying to put pressure on Russia because he needs to be seen to do something. He’s putting the pressure onto Europe.”

According to Munchau, India finds itself caught in the middle of these global manoeuvres. He said the country is affected by the “grand posturing by Trump” but stressed that the situation in Ukraine remains critical. “The real question is, can they sustain another year, another two years of war without active American support? This is very doubtful,” he said.

Overall, Munchau emphasised that Europe’s interest in India is strong, but negotiations must ensure mutual benefit. “Europe wants to participate in India’s economic boom,” he said, “but this should not turn into a one-sided relationship.”

Below is the verbatim transcript of the interview.

Q: At a time of global uncertainty, how do you see India compared to other emerging markets and how do European businesses, according to you, view India, at a time when India and the European Union are negotiating a trade deal as well?

Munchau: India is going to play an increasingly important role for Europe. First of all, India is one of the few countries in the world that still imports European products. If you look at Germany, Europe's largest exporter, they had a massive trade surplus with the United Kingdom. But then came Brexit, and supply chains changed. Then came the pandemic, and many supply chains were affected. Then came the Russia war, and Russia was cut off. Then came Donald Trump's tariffs, and trade with the United States is going to become more difficult. China has become more competitive. So, India is the one uncontested trading partner. And there’s a lot of hope, certainly in Germany, but in the rest of the EU as well, on a free trading relationship with India. So, India is seen in Europe, and elsewhere as well, as one of the potential growth engines. And your 8% goal is very much what certain Europeans take seriously as a prospect to come.

Q: I would also like to ask you, what do you think the European Union would be wanting from this trade deal with India right now, if this has to be a win-win for both sides? What would be the contours of a deal that the European Union would be looking at?

Munchau: I think this is the question, and I think you’ll find one of the problems India will have with the EU is that the EU is in favour of free trade with everybody, but it has come under a lot of constraints since it essentially folded in the trade negotiations with the Trump administration. You could call it a humiliating defeat, but it was in a position where it didn’t have a choice, because America provides Europe security. So, Trump got everything he wanted. The EU got nothing it wanted.

And we have already seen this with China. Europe is doing to China what America did to us. The openness and the willingness of Europe to sustain large trade deficits vis-à-vis China is probably limited. So, I am sceptical that there could be difficulties along the way, as the EU is trying to see India as a market for its exports, particularly machinery and plant exports. Europe wants to participate in India’s economic boom in the next 20 years until India reaches its economic goal of becoming an advanced economy.

But what happened with China 20 years ago was that the EU, and Germany particularly, were running surpluses against China, but then China turned the situation around. I would think that this time, the EU will be less tolerant of such a turnaround. And I think this is something that India has to bear in mind in those trade negotiations—that this should not turn into a one-sided relationship.

Q: You’ve got Donald Trump, who’s pressurising the European Union to also cut energy ties with Russia. He has already imposed 100% tariffs on India, trying to corner India in order to put pressure on Russia. Do you see European countries significantly reducing their energy partnership with Russia?

Munchau: They have done so to a large extent. The gas pipelines are no longer operational. The oil exports are down, but there are parts of the EU that are still heavily dependent on Russian gas and oil. The EU promised to bring this date forward, which is going to be very difficult.

I see what Trump does in a very different way. Trump is trying to put pressure on Russia because he needs to be seen to do something. He has come under criticism for siding with Putin. So, he’s putting the pressure onto Europe. He also said recently that Ukraine is doing better in the war, that Ukraine could win the war. There’s no evidence for this. If we look at the situation on the ground, it’s as dire today as it was a month or two ago.

So, what I think is happening is Trump is setting us up, and he wants to blame others if this war in Ukraine turns out negative for Ukraine and negative for Europe. He wants to be in a position where he can deflect the blame away from himself to the Europeans. So, I think this is a blame-shifting game rather than a serious effort. And I think Europeans should be careful about this.

India is obviously caught in the middle. It’s part of this grand posturing by Trump, but it doesn’t replace a strategy. The fact is that he has withdrawn financial aid from Ukraine. The US was the biggest supporter of Ukraine, having spent over $100 billion on Ukraine. They still share intelligence. It’s not like the US has completely gone, but the situation for Ukraine is pretty dire.

So, the real question is, can they sustain another year, another two years of war without active American support? This is very doubtful.Read about our editorial guidelines and ethics policy