European Digital Sovereignty: Valuing Closer Cooperation with India from Regulatory Power to Strategic Capacity

Over the past decade, Europe has established itself as the world’s leading regulatory power in the digital domain. With the General Data Protection Regulation (GDPR), the Digital Markets Act (DMA), the Digital Services Act (DSA) and, most recently, the AI Act, the European Union has shaped global debates on privacy, competition and trustworthy artificial intelligence.

The so-called Brussels Effect is real. Companies worldwide increasingly design products and compliance systems around European standards. Yet, inferring from the September 2025 Draghi report on EU Competitiveness, the challenge is cumulative regulation.

Consider the GDPR, DMA, DSA, AI Act, Data Governance Act, Data Act and Cyber Resilience Act. Individually, each instrument addresses legitimate concerns. Collectively, however, they create a dense regulatory ecosystem that requires significant compliance capacity and resources. For large firms, compliance is manageable. But for startups and scale-ups, this becomes a barrier to growth and scale, entrenching legacy players.

Regulatory leadership does not automatically translate into technological sovereignty. The European Commission’s own assessments acknowledge that Europe remains highly dependent on non-European providers in critical digital infrastructure.

Around 70% of the European cloud market is controlled by US-based hyperscalers. Europe’s global manufacturing share of semiconductors has fallen from roughly 40% in 1990 to below 10% today. Production of the most advanced chips is almost entirely concentrated in East Asia.  A detailed analysis of this has been documented in Bertelsmann Stiftung’s February 2025 Eurostack study.

These structural asymmetries have direct economic and geopolitical consequences. The COVID-19 pandemic and the global semiconductor shortage exposed the vulnerability of European industries, especially automotive and manufacturing sectors. Even with a non cutting-edge chipmaker such as Eindhoven-based NXP, recent tensions between the Netherlands and China illustrate the increasingly geopolitical nature of semiconductor supply chains and expose structural vulnerabilities in Europe’s digital sovereignty.

At the same time, artificial intelligence (AI) is emerging as a general purpose technology that will shape productivity, public administration and social services. In 2019, McKinsey estimated that AI could add up to €2.7 trillion to Europe’s economy by 2030 if adoption accelerates. According to European Commission’s 2024 projections, achieving the targets of the Digital Decade 2030 could generate more than €2 trillion in additional GDP over the coming years.

Of course, there are multiple reports of the AI bubble and the hyper valuations driven by investor mania and less by market fundaments. Irrespective of the financial valuations, the centrality of AI in military and defence architecture was highlighted by the recent feud between Anthropic and the US Department of War.

This means digital sovereignty is not an abstract political slogan. It concerns Europe’s ability to capture value from digital transformation, protect democratic standards and avoid excessive strategic dependencies in core technological layers, such as compute capacity, cloud infrastructure, semiconductors and AI systems. In this context, partnerships become decisive. Sovereignty in an interconnected world is not achieved through isolation, but through carefully designed strategic interdependence. India is emerging as one of the most important partners in this regard.

India as a digital systemic actor

In the past decade, India’s digital transformation has been remarkable in scale and speed. With a population of over 1.4 billion and more than 900 million internet users, India represents one of the world’s largest digital markets. Its median age of around 28 years contrasts sharply with Europe’s median age of approximately 44, highlighting complementary demographic dynamics.

India accounts for nearly half of global real-time digital payment transactions, according to data from the Bank for International Settlements. The Unified Payments Interface has transformed financial inclusion and digital commerce. The broader India Stack – including Aadhaar digital identity that covers more than 1.3 billion people), DigiLocker and other interoperable platforms – constitutes one of the most extensive digital public infrastructures worldwide. The World Bank and UNDP have highlighted this model as a scalable framework for inclusive digital transformation. Digital solutions coming out of India are already operational in eight countries, including UAE, Nepal and Singapore, while MoUs have even signed with more than 20 other countries.

India is a technology powerhouse for talent and services. Its IT and business process management sector generates more than $200 billion annually in exports, employing millions and serving as a backbone for global digital operations. India produces approximately 1.5 million engineering graduates each year. In the field of AI, India ranks among the fastest-growing contributors to research output and talent supply, according to Stanford’s 2025 AI Index.

For Europe – facing demographic decline and an estimated shortage of hundreds of thousands of ICT specialists – this talent dimension is particularly relevant. The EU’s Digital Decade target of reaching 20 million ICT professionals by 2030 will be difficult to achieve without structured international cooperation.

India is not merely a market. It is a systemic actor in digital governance, infrastructure and innovation. Together with India, EU can not only influence the global governance of digital sector but become a force for good in the global south by combining its regulatory expertise with India’s population-scale solutions tested in challenging infrastructure. The February 2026 AI Impact Summit in New Delhi further underlined this role for India.

The AI Impact Summit and the New Delhi Declaration

The AI Impact Summit 2026 brought together around 90 countries and international organisations, including the European Union. The adoption of the New Delhi Declaration marked a significant moment in global AI governance. While the declaration is voluntary and non-binding, its political signal is substantial.

The Declaration centres on several core principles: Democratising access to AI resources; promoting AI for economic growth and social good; ensuring secure, trusted AI systems; strengthening AI for scientific cooperation; expanding access and inclusion; investing in human capital; and fostering resilient, energy-efficient AI infrastructures.

For Europe, these principles resonate strongly with the logic underpinning the AI Act and the broader Digital Decade strategy. The emphasis on trustworthy, human-centric AI aligns with European regulatory priorities. The focus on human capital and inclusive growth mirrors Europe’s concern about digital divides and skills shortages. The call for democratising AI resources speaks directly to concerns about the concentration of computer power and foundational models in the hands of a few global actors.

Importantly, the New Delhi Declaration underscores the geopolitical reality that AI governance cannot be shaped by two superpowers alone. The EU’s endorsement signals recognition that building a multipolar, democratic digital order requires structured cooperation with partners such as India.

Strategic complementarities: Where cooperation strengthens sovereignty

Closer EU-India cooperation can enhance European digital sovereignty across five interconnected dimensions.

1. Semiconductor resilience: The EU Chips Act mobilises more than €43 billion in public and private investment with the objective of doubling Europe’s share of global semiconductor production to 20% by 2030. India has launched its own semiconductor mission with significant financial incentives to build fabrication and advanced packaging capacities.

Coordinated strategies – ranging from joint R&D and skills development to complementary investment frameworks – could diversify supply chains and reduce over-concentration in East Asia. Even modest diversification in assembly, testing and packaging could materially strengthen European industrial resilience. Though India has been a hub for chip design for multinationals, such as like Intel and AMD, many are increasingly looking at India as a part of their China plus one strategy.

2. Trusted digital infrastructure: The Catena-X initiative represents Europe’s first trusted and collaborative data ecosystem for the automotive sector. It allows for secure, standardised sovereign data exchange along the entire value chain, from OEMs and suppliers to mid-sized firms. A key principle is that companies retain full sovereignty over their data. Through shared standards and interoperable platforms, Catena-X seeks to improve transparency, efficiency and industry resilience. India’s experience in building population-scale digital public infrastructure offers practical insights into interoperable design and scalability.

A structured EU-India dialogue on federated cloud models, cross-border data governance and sectoral data spaces could produce interoperable frameworks that reduce dependence on a small number of global providers. Given that the combined EU-India economic area represents nearly €20 trillion in GDP and almost 1.8 billion citizens, joint standards could exert significant global influence.

3. AI governance and standards: The EU AI Act introduces a risk-based regulatory approach that is already shaping international debates. India’s policy discussions emphasise innovation, accessibility and societal benefit.

Coordinated positions in international standard-setting bodies, such as ISO, IEC and ITU, could amplify democratic governance principles and support multilateral institutions that are under great pressure and suffering from budgetary cuts. The Germany-India AI Pact, signed in February 2026, focuses on closer collaboration on AI research, industrial use, talent development and trustworthy AI. This can be scaled to a EU level.

4. Talent and human capital: Europe’s ageing population and projected workforce decline stand in contrast to India’s demographic advantage. Structured mobility pathways, joint degrees, research collaborations under the Horizon Europe research and innovation project, and mutual recognition of digital skills certifications could help address Europe’s ICT shortfall while strengthening bilateral innovation ecosystems.

Integrating even a fraction of India’s annual engineering graduates into EU innovation networks would substantially ease constraints on growth and digital transformation. The main challenges are limited human mobility between EU countries for non-EU nationals, as well as an anti-migration political shift that needs to be overcome at a member-state level.

5. Innovation and startup ecosystems: India’s more than 100 unicorns and Europe’s deep research base offer opportunities for cross-investment and co-development. Joint innovation funds, co-financed by public and private actors, could target areas of strategic relevance, such as AI for climate mitigation, cybersecurity, quantum technologies and green digital infrastructures. European startups could explore the Indian market instead of automatically gravitating towards the US. The lessons learned from the challenges there would help them scale in the global south.

Geopolitical implications

The global digital order is increasingly shaped by US–China rivalry. In its 2024 Joint Research Centre report, Europe articulated an ambition for “open strategic autonomy”. This means remaining deeply integrated in global markets while reducing critical dependencies and defending democratic values.

India pursues a doctrine of strategic autonomy as well, balancing relationships while expanding its influence in global governance forums, such as the G20. The AI Impact Summit and the New Delhi Declaration demonstrated India’s ambition to act as a convening power in shaping inclusive AI governance.

A stronger EU-India digital axis would help prevent a binary technological order dominated by two poles. Together, the EU and India represent roughly a quarter of humanity and about 20% of global GDP. This scale is sufficient to shape global norms, particularly in emerging markets where digital public infrastructure and AI for development are central policy priorities. The EU-India Free Trade agreement is not only an economic, but a geopolitical signal anchoring multi-sectoral cooperation.

Joint initiatives in third countries, especially in Africa or Southeast Asia, could combine European regulatory expertise with India’s operational experience in scaling digital infrastructure. Such cooperation would extend both partners’ influence while reinforcing democratic digital governance models.

What should policymakers do now?

For decision-makers in Berlin and Brussels, the key challenge is operationalisation. High-level declarations must translate into structured programs with measurable outcomes.

At EU level, the Trade and Technology Council with India should evolve into a more ambitious digital sovereignty partnership platform with dedicated working groups on semiconductors, AI governance, trusted cloud infrastructure and human capital. Funding instruments under Digital Europe, Horizon Europe, and the Chips Joint Undertaking should include explicit cooperation windows with India.

Germany, given its industrial base and strong economic ties with India, is particularly well positioned to act as a catalyst. A regular high-level digital dialogue, alignment of skilled migration policies with strategic technology sectors, and joint semiconductor research initiatives would strengthen resilience and competitiveness.

Lawmakers in the Bundestag and European Parliament should support budget allocations for institutional and people-to-people dialogue to smooth out the nitty-gritty of implementation. Industry stakeholders should establish structured alliances that go beyond outsourcing and focus instead on co-development and diversification.

Conclusion

Europe’s digital sovereignty will not be secured through regulation alone, nor will it be achieved through technological autarky. In a globalised digital economy, sovereignty is strengthened through strategic partnerships that enhance resilience, expand capacity and amplify normative influence. India’s digital scale, talent base, public infrastructure experience and growing role in global AI governance make it one of Europe’s most consequential partners. The New Delhi Declaration underscores a shared commitment to inclusive, trustworthy, human-centric AI development.

For policymakers in Berlin and Brussels, the strategic insight is clear. Closer digital cooperation with India is not an optional add-on to Europe’s sovereignty agenda. It is a central pillar of making that agenda economically viable, geopolitically credible and normatively influential in the decades ahead.

About the author

Murali Nair is a Senior Project Manager at the Europe Program focusing on India and Indo-pacific. His current area of research is on digital cooperation between EU and India.