India and Europe’s Defence Opening, A Strategic Opportunity in Turbulent Times
New Delhi should engage Brussels to clear the decks for a strategic defence partnership. Europe’s leaders got their first wake-up call during Donald Trump’s first term and the Russian invasion of Ukraine. In addition to supporting Kyiv with arms and money, they began thinking of European defence. It was in 2025, after Trump’s return to power, that they got serious.
Brussels fast-tracked a ReArm Europe package that would make €800 billion available for defence spending over the next five years and encouraged the European Investment Bank to expand lending to defence and security projects. This is not incremental change; it is a paradigm shift.
The ReArm Europe Package
The ReArm package has two fiscal levers. The first is a National Escape Clause that allows each member state to increase defence spending by 1.5% of GDP without violating fiscal rules, generating €650 billion for defence. This is a massive infusion of resources, freed from the usual budgetary constraints that have long limited European defence spending.
The second, Security Action for Europe (SAFE), is essentially a debt instrument. Brussels uses its better credit rating to allow member-states to borrow up to €150 billion from capital markets for rapid procurement. This is innovative finance—using the EU’s collective creditworthiness to lower borrowing costs for individual members.
To discourage the favouring of national champions, SAFE rules require common procurement across two or more countries. This is a deliberate move to break down the fragmented, nationally-focused defence markets that have long plagued European defence cooperation.
To promote strategic autonomy, 65% of the procurement costs must flow to manufacturers in Europe. Partner countries like the UK, Canada, Norway, Japan—and potentially India after the recent signing of the Security and Defence Partnership Agreement—can be suppliers. That said, purchase decisions remain in the hands of member-states.
The Critics’ View
Critics, foremost Bruegel, a European think-tank, point out that these initiatives are inadequate. It has proposed a more ambitious European Defence Mechanism, a treaty-based instrument that would create a single defence market among members, centralised procurement and collective ownership of defence assets, effectively setting the stage for a unified European military command.
It is unclear when European politics will be ready for that. The EDM would require a level of integration that many member-states are not yet willing to accept. For now, the NEC and SAFE initiatives are in focus. Even if they don’t offer Europe the desired strategic coherence, they have galvanized Europe’s defence industries.
The Opportunity for India
As I wrote in a previous column, this opens up a window of opportunity for India. Today, India is actually rearming Europe’s best path to innovation, cost-reduction and economies of scale. At the margin, India’s startup ecosystem can provide Europe’s defence industries an additional route to innovation, partly making up for what they have lost in the US.
Using global capability centres in India lets European firms focus resources on core military industrial activities. Unit costs of everything from ammunition to aircraft can fall if the Indian armed forces buy the same gear. The SDP, signed alongside the India-EU FTA last month, is a key to unlocking deeper defence industry ties.
The Path Forward
New Delhi and Brussels should prioritize additional pacts that enable Indian firms to participate in Europe’s rearmament. The early harvest can come when, under SAFE, up to 35% of the procurement can be fulfilled by Indian subsidiaries or sub-contractors. This is not a trivial opportunity. It represents billions of euros in potential contracts.
Europeans have legitimate concerns over India’s relations with Russia, just as Indians do over Europe’s relations with China. Geopolitical realities are what they are, but practical solutions can be found. One way out would be for New Delhi and Brussels to agree to an intellectual property, supply chain transparency and certification arrangement where Indian firms servicing European defence contracts are firewalled from the few that do business with Russia.
This is not about choosing sides. It is about managing complexity. India has historically maintained defence ties with Russia while also deepening cooperation with the West. Europe has trade and investment ties with China while also recognising the strategic challenge it poses. These are not contradictions; they are realities that can be managed with clear rules and transparency.
A Two-Way Street
The defence partnership between India and the EU has become a two-way street and its traffic profile will change over time. Initially, it may be about Indian firms serving as sub-contractors to European primes. Over time, it could evolve into co-development and co-production. Eventually, Indian-designed systems might find their way into European inventories.
Amid today’s tumult in world affairs, the potential opening of Europe’s defence market to Indian firms could serve both European and Indian quests for strategic autonomy. For Europe, it means diversifying supply chains and accessing Indian innovation and scale. For India, it means deeper integration with European defence industries and access to advanced technologies.
Conclusion: Seizing the Moment
The ReArm Europe package represents a once-in-a-generation opportunity for India to integrate into European defence supply chains. The window will not remain open indefinitely. As Europe ramps up its defence spending, it will build relationships with suppliers. Those who get in early will have an enduring advantage.
New Delhi should engage Brussels urgently to clear the decks for a strategic defence partnership. The SDP provides a framework. Now it needs to be filled with substance—with agreements, with contracts, with relationships. The opportunity is real. The question is whether India will seize it.
Q&A: Unpacking the India-Europe Defence Opportunity
Q1: What is the ReArm Europe package and how large is it?
ReArm Europe is a €800 billion package over five years to boost European defence spending. It has two components: a National Escape Clause allowing members to increase defence spending by 1.5% of GDP without violating fiscal rules (generating €650 billion), and SAFE, a debt instrument allowing members to borrow €150 billion from capital markets for rapid procurement using the EU’s better credit rating.
Q2: What procurement rules create opportunities for non-European suppliers?
SAFE rules require common procurement across two or more countries and mandate that 65% of costs flow to European manufacturers. However, partner countries—including India following the Security and Defence Partnership Agreement—can be suppliers for the remaining 35%. Purchase decisions remain with member-states, creating openings for Indian firms to participate as sub-contractors or subsidiaries.
Q3: How can India specifically benefit from this?
India’s startup ecosystem can provide Europe with innovation partly compensating for what it has lost in the US. Global capability centres in India allow European firms to focus on core activities while reducing costs. Unit costs can fall if Indian forces buy the same equipment, creating economies of scale. Early opportunities lie in the 35% non-European procurement allowance under SAFE.
Q4: How can the Russia-India defence relationship be managed with Europe?
Practical solutions exist: agree to an intellectual property, supply chain transparency, and certification arrangement where Indian firms servicing European contracts are firewalled from those doing business with Russia. This manages geopolitical complexity without forcing India to choose sides. Europe has similar complexities with China; both sides can manage these realities with clear rules.
Q5: What is the long-term vision for India-EU defence partnership?
Initially, Indian firms as sub-contractors to European primes. Over time, co-development and co-production. Eventually, Indian-designed systems could enter European inventories. The partnership becomes a two-way street serving both sides’ quest for strategic autonomy—diversifying supply chains for Europe, deeper integration and technology access for India. The SDP signed with the FTA provides the framework; now it needs substance.
