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31. India-China rapprochement: what are the long-term prospects?

Author:
Nayanima Basu and Alicia Garcia-Herrero
Publication Date:
05-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China-India relations, which have long been fraught, were further complicated by the 2020 military standoff on the Himalayan border. The political disruption had a significant impact on Chinese companies’ presence in India. And yet, India’s dependence on Chinese imports has increased since. The Indian economy is decelerating at a challenging time for Prime Minister Modi, who governs in a coalition. China could offer a partial solution to India’s economic woes by providing manufacturing FDI and creating jobs. The Modi-Xi ‘rapprochement’ after their encounter at the October 2024 BRICS summit signals that relations could improve. India may be willing to accept targeted investment from China, but relations are unlikely to fully normalise, particularly since the 2025 India-Pakistan military stand-off. There are three main reasons for this. First, the Indian army remains cautious about the situation at the border and security risks relating to China. Second, the United States under President Trump will exert pressure on Modi not to depend further on China. This is even more relevant in the context of Trump’s threat to impose tariffs on India. Third, Indian public opinion on China and the Belt and Road Initiative remains negative. India is predicted to experience greater growth than China in the coming decades, meaning China could lose its upper hand in economic relations between the two countries. This, however, will depend on how dependent India might have become on China for imports or for jobs through FDI and other channels. The militarised border, India’s asymmetric economic dependence on China and China’s leadership in the Global South will still shape the relationship even if the Indian economy grows to a similar size to China’s. India-China ‘rapprochement’ is possible but will remain fragile and unlikely to be maintained in the long run.
Topic:
Bilateral Relations, Governance, Economy, Economic Growth, Investment, and Trade
Political Geography:
China, India, and Asia

32. The time is right to make a European Union-India trade deal happen

Author:
Ignacio Garcia Bercero and André Sapir
Publication Date:
07-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Nearly 20 years have passed since the EU and India started negotiations on a bilateral trade and investment agreement. After seven years of intense negotiations, the process stalled in 2014, primarily because of the failure of the respective political leaders to make difficult choices. Talks restarted in 2022 and now offer a reasonable chance of delivering a bilateral free-trade agreement “within the course of the year”, as Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen declared in February 2025. The EU and India both rank among the world’s five largest economies in terms of GDP. Yet much separates the two economically. India’s GDP per capita is much lower than the EU’s, and its level of trade and investment protection is much higher than that of the EU or even its middle-income peers. However, India has recently enjoyed faster growth than any other large economy, including China. The EU and India are also being brought closer by the global geopolitical situation and their common pursuit of strategic autonomy and economic security. The two sides should learn the lessons from past failure and reach an ambitious agreement in areas that previously proved difficult, such as goods tariffs and services, and in new areas, such as climate protection, that could again derail the revived negotiation if not managed well. A deal by the end of 2025 will have economic benefits and will also reinforce the broader economic and political links between the EU and India at a time when world affairs are under severe strain. An ambitious agreement could also help reconstruct a rules-based global order for the new multipolar world. This is particularly important for the multilateral trade and climate regimes, where converging EU and Indian positions could have a major influence on the redesign of international institutions and rules.
Topic:
Treaties and Agreements, Bilateral Relations, Governance, European Union, and Trade
Political Geography:
Europe, South Asia, and India

33. A New Triangle: The Interplay Between China and EU-India Relations

Author:
Philippe Le Corre
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
China has shaped the U.S.-India relationship for decades.1 Today, another significant triangle is emerging: the China-EU-India relationship. Indian and European leaders are strengthening ties. Both view China as a formidable economic and security rival while regarding the United States as a key security partner (and, for Europe, a long-standing ally). What is the current state of EU-China and EU-India relations? As India’s influence and economic appeal grow, could it become a viable alternative to China for European business leaders and policymakers? How is Brussels incorporating India into its strategies to address a potential crisis in Asia or the broader Indo-Pacific? Twenty-five years ago, the European Union viewed China as a top priority for business, cultural exchanges, and diplomacy. Following the introduction of Beijing’s open-door policy in 1978 and with strong encouragement from Chinese authorities, European companies flocked to China. Initially, many Europeans used Hong Kong as an intermediary for business, but by the mid-1990s, Guangdong Province and Shanghai became key gateways to the Chinese market, particularly for Germany and France.2 Trade and investment surged, especially after China’s accession to the World Trade Organization (WTO) in 2001, which was widely supported by European political and business elites. Today, China remains the EU’s largest trading partner, with substantial European investments across the mainland. In contrast, India was long viewed as a potential partner, but only a few EU member states took steps to forge a strategic partnership with New Delhi. European investments in India were — and still are — limited, with many corporations citing challenges such as inadequate infrastructure, market access barriers, and bureaucratic red tape, which make it difficult to operate in most Indian states. However, the mood has begun to shift. On the EU side, the European Commission’s 2019 China strategy characterized Beijing as “a partner, a competitor, and a systemic rival.” The COVID-19 pandemic, which disrupted direct links between Europe and China from 2020 to 2022, caused significant strain. This was followed by Russia’s invasion of Ukraine in February 2022, an event many on the continent perceive as having Beijing’s tacit support. Additional factors, including an increasingly authoritarian regime at home and a more assertive China abroad, have contributed to European perceptions,3 as explained at length by the Center for China Analysis’s latest Global Public Opinion on China project.4 This, in turn, has affected the EU-China relationship, which has been gradually downgraded from the “honeymoon” period of 1995–2015. On the other hand, the strengthening EU-India relationship is a relatively recent development, driven by several factors that have emerged in the wake of the pandemic. These include the rise of the ambitious Bharatiya Janata Party under Prime Minister Narendra Modi, who first took office in 2014 and is now serving his third term, as well as a broader diversity of partnerships between the EU and India. Other factors influencing EU-India relations include the growing assertiveness of the People’s Republic of China and the United States’ shift away from multilateralism during President Donald Trump’s first term (2017–2021). Since January 2025, the increasing probability of a break in the transatlantic alliance under the new Trump administration is leading the EU to look for new partners, including in the Indo-Pacific region. In addition, India’s robust GDP growth — 6.6% in 2025 and a projected 6.7% in 2026 — has attracted European businesses.5 In a global environment defined by multipolarity, could the previously low-profile EU-India relationship evolve into a closer partnership? With EU-China relations facing significant challenges, might India emerge as a viable alternative Asian partner for Europe? The current EU-India relationship is described as “strategic.” In reality, it is partial and uneven, and there are major differences in the nature of relations between India and individual EU member states. Meanwhile, how does Beijing view its competitor in the Global South as it seeks to win over Europe’s support? This paper explores the dynamics of the interaction among these three powers in the rapidly changing geopolitical context. It examines India’s political and economic challenges in the context of the EU-China relationship, how the EU-India relationship is evolving, and whether an EU-India partnership could take center stage if tensions with China escalate. European countries have kept strong ties with the Global South, and some see a strong India as a potential bridge for fostering cooperation in Southeast Asia, the Middle East, and Africa.
Topic:
Foreign Policy, Diplomacy, Economics, Bilateral Relations, and European Union
Political Geography:
China, Europe, India, and Asia

34. Mapping India-Pakistan military power

Author:
Rajeswari Pillai Rajagopalan and Linus Cohen
Publication Date:
06-2025
Content Type:
Policy Brief
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
Security competition between India and Pakistan, rooted in the territorial dispute over Kashmir, has persisted since the partition of British India in 1947. Since the 1990s, Pakistan’s support for insurgent and terrorist groups in Indian-administered Kashmir has posed a persistent challenge to Indian security. While both countries have maintained nuclear arsenals since the late 1980s, the threat of escalation has historically constrained India’s responses. However, India’s posture has shifted in recent years, with a growing willingness to conduct overt cross-border strikes and covert operations targeting terrorist infrastructure in Pakistan. This evolution has been marked by key incidents, including the 2016 Uri attack and India’s surgical strikes, the 2019 Pulwama bombing and Balakot air strike, and the April 2025 Pahalgam attack, which triggered a series of retaliatory strikes by both sides. India’s targeting of major Pakistani air bases in 2025 marked a significant escalation, raising concerns about strategic stability. China’s role further complicates the regional picture. As Pakistan’s close ally and India’s primary military rival, China’s growing involvement—through arms transfers and strategic coordination—has led Indian planners to seriously consider the possibility of a two-front war. This ASPI brief provides a overview of the current military balance between India and Pakistan, with a focus on quantitative comparisons of defence spending, conventional military capabilities, and strategic assets. India has consistently maintained a superior conventional military force, particularly in terms of major equipment categories, shaping the strategic calculus on both sides.
Topic:
Foreign Policy, National Security, Military Affairs, Strategic Competition, and Regional Politics
Political Geography:
Pakistan, South Asia, India, and Asia-Pacific

35. Tariff Tensions: Redefining Washington-New Delhi Relations

Author:
FARAS
Publication Date:
08-2025
Content Type:
Policy Brief
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
The strategic partnership between the United States and India faces a critical juncture as recent developments strain their ties. On August 15, 2025, Indian Prime Minister Narendra Modi called for national self-reliance in trade and foreign exchange, a response to high tariffs imposed by US President Donald Trump's administration on Indian imports.
Topic:
Bilateral Relations, Tariffs, Trade, Donald Trump, Imports, and Narendra Modi
Political Geography:
South Asia, India, North America, and United States of America

36. The Indian Factor: Analyzing Pakistan-Turkey Rapprochement and its Implications for India

Author:
FARAS
Publication Date:
06-2025
Content Type:
Policy Brief
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
In a move that reflects the deepening ties between Pakistan and Turkey, Pakistani Prime Minister Shehbaz Sharif visited Turkey on May 25–26, 2025 — his second visit to the country this year — as part of a broader regional diplomatic tour that also included Iran, Azerbaijan, and Tajikistan. The tour aimed to express Pakistan's gratitude and strengthen regional partnerships in the wake of its recent military confrontation with India. Turkey's support for Islamabad during this conflict has strained India–Turkey relations, prompting New Delhi to launch campaigns calling for the boycott of Turkish products and services.
Topic:
Diplomacy, International Cooperation, Partnerships, Rapprochement, and Regional Politics
Political Geography:
Pakistan, South Asia, Turkey, and India

37. And the search goes on: Job search and job-finding rates in urban India

Author:
Rahul Menon and Paaritosh Nath
Publication Date:
08-2025
Content Type:
Working Paper
Institution:
Centre for Sustainable Employment, Azim Premji University
Abstract:
The cross-sectional nature of Indian employment surveys limits a true understanding of labour market dynamics. Using innovations in official national-level labour surveys that track urban individuals across four quarters, we study transitions from unemployment to employment — defined as the job-finding rate — to understand whether those seeking employment are able to find suitable work in urban India. Our analysis reveals significant weaknesses in the urban Indian economy over the period 2017 to 2023. On an average, only 17 per cent of unemployed individuals in any quarter find a job in the next quarter. Job-finding rates are the lowest for women, the young and the highly educated. Hazard-rate analyses reveals that the same cohorts take the longest time to find jobs, with a majority remaining unemployed even after four quarters of job search. We demonstrate the impact of the pandemic on urban labour markets in two ways. Not only are job-finding rates significantly lower in the post-lockdown period relative to pre-lockdown, there has also been a shift in the nature of jobs created, with casual work rising and regular wage and self-employment falling post-lockdown. Our analysis has important policy implications for understanding labour market dynamics and for the design of urban employment schemes.
Topic:
Employment, Economy, Urban, and Labor Market
Political Geography:
South Asia and India

38. India-Australia Economic Cooperation and Trade Agreement

Author:
Anil Wadhwa and Manjeet Kripalani
Publication Date:
01-2025
Content Type:
Special Report
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
India and Australia signed an Economic Cooperation and Trade Agreement (ECTA) in December 2022. The ECTA is the first of a unique, two-part trade agreement that will bring India into global trade regimes in a calibrated manner. For Australia, with its global trading knowledge and pragmatic approach, gaining first-mover advantage in India’s large market is a major win. This case study explains the elements of ECTA.
Topic:
Economics, International Cooperation, Treaties and Agreements, Bilateral Relations, and Trade
Political Geography:
South Asia, India, and Australia

39. Putting US-India Trade Negotiations Back on Track

Author:
Aparna Pande and Bill Drexel
Publication Date:
08-2025
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
On April 2, 2025, which the White House dubbed “Liberation Day,” President Donald Trump announced broad, sweeping tariffs on over 90 countries. While the president’s announcement caused anxiety in foreign capitals, officials in New Delhi remained relatively calm. United States–India relations had been improving for more than two and a half decades, and the US had become India’s largest trading partner. By most accounts, President Trump respected Prime Minister Narendra Modi—even going so far as to refer to his Indian counterpart as his “good friend.” Furthermore, during an official visit in February 2025, President Trump and Prime Minister Modi announced a series of trade targets suggesting that a wider trade deal was imminent. The two leaders pledged to pursue $500 billion in bilateral trade by 2030—more than double the current volume—and promised to deepen US arms sales to India, including by laying the groundwork for future acquisitions of F-35 fighter jets. Prime Minister Modi committed to increasing energy imports from the US and reducing tariffs on American goods. India, by most accounts, was eager to address the Trump administration’s concerns about trade imbalances, and the two sides set fall 2025 as a target for finalizing a bilateral trade agreement. Meanwhile, due to strong messaging from the Trump team against production based in the People’s Republic of China (PRC), Apple announced plans to shift all assembly of its US-bound iPhones to India. Prime Minister Modi also spoke with Elon Musk to discuss providing Tesla with access to Indian markets. Vice President JD Vance even visited India in late April 2025, and lauded the country’s “sense of infinite possibility.”
Topic:
Economics, Bilateral Relations, Negotiation, and Trade
Political Geography:
South Asia, India, and United States of America

40. Revenue and Cost Uncertainties and Market Power

Author:
Abhishek Kumar, Apra Sinha, and Gazi Salah Uddin
Publication Date:
03-2025
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Using administrative plant-level data from India, we estimate the effect of revenue and cost uncertainties on markup (product market power), markdown (labour market power), and combined market power. We show that historical two- and three-digit industry averages of exports, imported inputs, and oil share are valid instruments for exports, imported inputs, and oil share at the plant level. The results suggest that revenue and cost uncertainties affect markup differently: revenue uncertainty decreases markup, whereas cost uncertainty increases markup. Despite the opposite effect of these uncertainty measures on product market power, revenue and cost uncertainties tend to increase combined market power. This is because the revenue uncertainty significantly increases labour market power. Heightened cost uncertainties reduce labour market power but by less compared to increases in product market power. Given the results obtained in this paper, it is important to make a distinction between revenue and cost uncertainty to understand their cyclical nature.
Topic:
Oil, Labor Market, Volatility, Revenue, and Exchange Rates
Political Geography:
South Asia and India