Elevating the European Union in South Asia

The European Union (EU) has the relationships, expertise, trade leverage, and normative credibility to become a more meaningful partner in shaping the future of South Asia, a critical region for European economic and security interests. Its relationship with India has developed very positively in recent years, marked by a trade deal and renewed focus on tech, defence, and security. EU also remains engaged in a strategic dialogue with Pakistan and, while not comparable with the depth and scope of the EU–India partnership, the recent EU–Pakistan leaders’ meeting on the sidelines of the UNGA points in a positive direction.

There is scope for a more present, coherent, and strategically minded EU in South Asia

But the same cannot be said about other South Asian countries, especially Bangladesh, Nepal, Sri Lanka, and the Maldives. These countries would benefit from more engagement with, and support from, the EU as they face multiple structural challenges, both domestic and external.

There is scope for a more present, coherent, and strategically minded EU in South Asia, achievable within existing European fiscal constraints. This would require more high-level political visits, stronger diplomatic missions, smarter economic assistance, and a regional outlook focused on the Indo-Pacific, including closer cooperation with India on regional connectivity as an enabler of peace and prosperity.

South Asia: A Region in Transition

South Asia is home to approximately two billion people across eight countries, including three of the world’s ten most populous nations (India, Pakistan, and Bangladesh). The region is crucial to European interests amidst shifting global supply chains and geopolitical realignments.

The demographic dividend alone demands attention. Over half of South Asia’s population is under the age of 25, with young people entering the labour market, digital economy, and political arena simultaneously. By 2030, India is projected to add some 90 million workers to the global labour force. This youth bulge is the region’s greatest asset but, if mismanaged, could become its most acute source of instability. For Europe, which is negotiating labour mobility agreements while remaining wary of any future refugee and other irregular migration, the outcome matters directly.

Economic ties with Europe are also growing. The EU is India’s second-largest trading partner and the largest export destination for Bangladesh’s garment sector. The IMF projects India’s GDP growth at around 6.5 per cent annually through the late 2020s—a rate no G7 economy can match. Bangladesh, Nepal, and Sri Lanka are all navigating the graduation from low-income to middle-income status, opening new opportunities for European exporters and investors.

Climate and sustainability pose an existential challenge across the region. Nepal’s recent climate-triggered calamity and the Maldives, with a mean elevation of under two metres, facing submergence within decades highlight these risks. These issues are a direct consequence of emissions to which South Asian countries have contributed the least. Pakistan suffered catastrophic floods in 2022 that submerged a third of the country and caused USD 30 billion in damages.

Across South Asia, European investors, universities, regulatory standards, and development programmes enjoy a broadly positive image

The very dynamism that makes South Asia an opportunity also risks making it a source of fragility. The region has absorbed the compounding shocks of concurrent geopolitical and economic crises—the wars in Ukraine and Iran, the global tariff confrontation disrupting trade flows, and rising protectionism and weaponisation of interdependence—all of which have imposed severe pressure on trade balances, energy costs, and growth prospects across the subcontinent.

A Greater Role for the EU in South Asia: Six Options

The EU enters this moment with some advantages. Across South Asia, European investors, universities, regulatory standards, and development programmes enjoy a broadly positive image—particularly in contrast with the rapidly declining reputation of the United States.

The challenge, therefore, is not the level of economic engagement; it is often the absence of political engagement, strategic intent, and a persistent mismatch between EU ambition and the efficiency of its instruments. A more impactful EU presence in South Asia (beyond India) does not require a proportionally larger budget—it requires smarter budgetary allocation and clearer political direction. I forward here six options:

• Increase high-level political visits and EU delegations’ capacity: The near-absence of high-level EU visits to the region (besides India) is diplomatically conspicuous: No President of the European Commission has ever visited Kathmandu, Dhaka, or Colombo (although French President Macron has visited both Dhaka and Colombo in recent years). If the entire Collegium of Commissioners can find time to visit New Delhi, the EU Commission and Council presidents should certainly also be able to find time to stop over in these capitals on their future trips to Asia. Bilateral member-state diplomacy is not a substitute for a coherent EU-level presence. Sustained engagement at the highest levels—underpinned by strengthened EU delegations in Colombo, Kathmandu, and Dhaka—would cost relatively little and signal a great deal to governments who are navigating intense great-power courtship and seeking to diversify their external partnerships.
• Coordination towards a Bay of Bengal regional outlook: The architecture of EU engagement should shift from an overly bilateral focus to greater regional coordination and coherence. EU delegations across South Asia must intensify regional coordination and consultations at various levels (beyond annual ambassadorial meetings) to bridge gaps and better identify opportunities for decision-makers in Brussels. A geoeconomic reorientation could also help. The “South Asia” focus, including both India and Pakistan, often poses hurdles to European decision-makers. An alternative EU focus on the Bay of Bengal might prove more productive, focused on the seven member states of BIMSTEC. An annual EU-Bay of Bengal dialogue in Brussels could pave the way for a more coordinated and strategic EU position in a pivot region linking South and Southeast Asia, with a focus on infrastructure connectivity, trade and tech supply chains, maritime security, and climate change.
• Focus more on capacity-building in governance and emerging policy areas: Soft, technical assistance on regulatory harmonisation, digital standards, and technology is an area of deep European expertise and genuine regional demand. Bangladesh is actively seeking partners to develop its digital regulatory framework; Sri Lanka needs institutional support in tax administration and public procurement to implement much-delayed reforms; Nepal and the Maldives are developing new policymaking units that require expert staff to monitor and address climate change. These are all useful entry points for the EU’s comparative advantage to create more durable institutional impact through training and capacity-building programs. South Asian states are struggling to absorb more external financing and economic inducements, further straining their debt and implementation capacity. Here, the EU must distinguish itself by offering support for long-term capacity that fosters more expert, autonomous bureaucracies and institutional resilience.
• Support regional economic growth and connectivity corridors: Where financing is deployed for physical connectivity, energy transition, and industrial development, the European Investment Bank (EIB) should take a substantially larger role, helping shift the economic engagement logic from aid to investment. The EU’s Global Gateway initiative has made a promising start on paper but is still struggling to find any implementation success in this region; South Asia should be a primary theatre, with priority given to clean energy corridors, digital connectivity, and port infrastructure that serves both economic and strategic purposes in the BBIN region. As one of the architects of the India–Middle East–Europe Economic Corridor (IMEC), the EU must continue pushing for its implementation. Finally, as the FTA with India advances, Brussels must also consider how to maximise positive spillover effects for Nepal, Bhutan, Bangladesh, Sri Lanka, and the Maldives through new intra- and inter-regional value chains.
• Development assistance must remain political but with new instruments to address regional sensitivities: The EU has a long history of supporting political transitions and peace in the region, whether during the Sri Lanka and Nepal civil wars, through electoral observers or judicial reforms. Support for democratic governance and resilient institutions is not a luxury add-on to the EU’s development portfolio; it is a direct investment in regional stability and, by extension, in EU security. The EU’s response to Bangladesh’s political transition in 2024 offered an opportunity to anchor early support for institutional reform, but that has been only partially achieved. Equally, EU governance programmes on democracy, human rights, conflict mediation, refugees, peacebuilding, etc., must be redesigned with clear-eyed awareness of a new landscape: competition from alternative models (China), rising opposition to Western political interference, and reduced support from the United States.

The EU and India must develop new communication and coordination channels on South Asia, possibly as part of a larger, Indian Ocean-focused dialogue

• Deepen coordination with like-minded partners, especially India: The EU must strengthen coordination with countries like India, as well as the United Kingdom, Japan, Australia, Canada, and the United States. Redundancy across partners’ development programmes in South Asia is chronic: multiple donors running parallel governance reform programmes in Nepal, overlapping relief to Rohingya refugee camps in Bangladesh, and several maritime security and governance projects involving Sri Lanka and the Maldives. Most importantly, the EU and India must develop new communication and coordination channels on South Asia, possibly as part of a larger, Indian Ocean-focused dialogue. Given India’s predominant influence and economic and security stakes in this broader geography, Brussels should consider where to align its activities with Indian interests and build stronger regional synergies with New Delhi.