EU’s Ursula von der Leyen wants to seal investment agreement with India, calls it ‘missing puzzle’

The investment agreement was being negotiated along with the trade deal but could not be finalised due to differences between the two sides, with dispute resolution being the most notable

Published – May 18, 2026 08:43 pm IST – Oslo/New Delhi

Suhasini Haidar,T.C.A. Sharad Raghavan

Prime Minister Narendra Modi poses for a picture with Prime Minister of Sweden Ulf Kristersson and European Commission President Ursula von der Leyen, in Gothenburg on Sunday, May 17, 2026.
| Photo Credit: DPR PMO via ANI

President of the European Commission Ursula von der Leyen once again called for an investment agreement between India and the European Union (EU), terming it a “missing piece of the puzzle” in the cooperation plans of the two economies.

Ms. von der Leyen was speaking at the European Business Round Table for Industry in Gothenburg, Sweden, where Prime Minister Narendra Modi also delivered his address.

The investment agreement, being negotiated alongside the trade deal, was not finalised as the two sides could not agree on some key aspects, the most notable being dispute resolution. 

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‘Half the equation’

“But trade is only half the equation,” Ms. von der Leyen said. “Our next step must be to deliver an investment agreement. This is the missing piece of the puzzle in our reinforced economic cooperation, especially in a world where supply chains are being reshaped, and economic security challenges us as never before. Deepening our investment ties will help us to de-risk and diversify.”

During his address, Mr. Modi did not touch upon the investment agreement but instead highlighted the benefits of the trade deal and the other agreements that have been signed between the EU and India. 

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“The India-EU FTA will create new opportunities for industries, investors, and innovators,” Mr. Modi said.

“The Security and Defence Partnership and the Mobility Agreement have given new strength to our strategic and people-centric partnership,” he added. “The India-EU Trade and Technology Council has further deepened our cooperation. We are working together in areas such as digital technology, clean energy, semiconductors, resilient supply chains, and innovation.”

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‘Trade agreement opened the door’

In the 26 years between January 2000 and December 2025, European countries have invested a little more than $110 billion as direct investment in India, making up for about 14% of the total foreign direct investment India has attracted during the period. 

However, the most recent years reveal considerable volatility in the inflows from Europe. 

For example, FDI from Europe stood at about $5.5 billion in 2025, having fallen from approximately $10.6 billion in 2024, which had seen a significant increase over the $5.3 billion in 2023.

Consequently, Europe’s share in India’s total FDI fell to less than 10% in 2025 from about 20% the year before, and about 13% in 2023. Ms. von der Leyen indicated that an investment agreement would enhance investment flows.

“Basically, one can say that the trade agreement opened the door,” Ms. von der Leyen added. “An investment agreement walks us through it.” 

On Tuesday (May 19), Mr. Modi will meet Nordic leaders from Denmark, Sweden, and Finland at the Nordic India Summit where the India-EU free trade agreement will be discussed again. 

Norway and Iceland — also part of the Nordic Summit — are EFTA countries that signed a separate Trade and Economic Partnership Agreement (TEPA) with India in 2024, which came into force in 2025. The occasion will also see a stock-taking of the progress of this deal thus far.

Compliance and dispute resolution

According to several people who have been tracking the negotiations between India and the European Union, the biggest factor holding up the investment agreement were the differences between the two economies on dispute resolution. Other issues pertain to concerns over land acquisition, judicial protections, and exit clauses.

India had in 2017 unilaterally put an end to nearly all its Bilateral Investment Treaties (BITs), and has subsequently announced a new approach to dispute resolution that has engendered uncertainty among foreign investors. 

The key issue is that, under the BITs, disputes over foreign investment used to be arbitrated in a third country. The new framework seeks to replace this with an India-centric dispute resolution process. 

Published – May 18, 2026 08:43 pm IST