During Chancellor Olaf Scholz’s recent visit to India, the German government renewed its push for an EU-India free trade agreement, calling for expedited negotiations. Speaking at the Asia-Pacific Conference of German Business in New Delhi, Scholz, Economics Minister Robert Habeck, and several German business leaders urged the EU and India to finalize a deal that’s been in the works since 2007.
As one of the world’s fastest-growing economies, India is set to become the third-largest economy by the end of this decade, surpassing Germany. Recognizing India’s economic potential, German officials see the country as essential for diversifying away from China. Yet several issues continue to hinder progress.
The automotive and pharmaceutical sectors present substantial barriers to the agreement. India imposes high tariffs on imported cars—up to 100% depending on the vehicle type—which the EU aims to reduce to facilitate European car exports. India, however, views these tariffs as protective measures for its domestic manufacturing sector, which includes foreign companies that produce within India to avoid high import costs.
In addition, intellectual property regulations, particularly in pharmaceuticals, have historically posed challenges. Minister Habeck noted that the agricultural sector is an even more complex issue. "Opening the Indian market entirely could have a destabilizing impact on local farmers," Habeck said, suggesting a more limited agreement initially focused on the industrial sector.
India’s Trade Minister Piyush Goyal emphasized that India is not entering these talks from a “position of weakness” and insisted that both sides must acknowledge each other’s economic needs. He highlighted India’s vast market, driven by a young and skilled workforce, as an asset for potential EU partners.
In Germany, there’s a growing interest in recruiting skilled workers from India. Over 140,000 Indians are currently employed in Germany, contributing to social insurance, and more are expected to join due to labor shortages. Last week, Germany introduced new policies to attract skilled workers from India, including streamlined digital visas, German language programs, and job fairs.
India produces about a million new job seekers each month, many of whom are well-educated but face limited employment opportunities domestically. This large pool of potential employees could benefit both countries, especially in sectors like healthcare and IT where Germany faces significant worker shortages.
