DiversifyEU: From Enabling Diversification to Regulating It & What It Could Mean For India?

The call acknowledges that diversification is not happening fast enough. The Commission therefore proposes moving from enabling diversification to actively driving it, including through trade measures that could make sourcing from a dominant supplier costlier and sourcing from alternatives, inside the EU or in trusted non-EU countries, more attractive.

The call leaves key design choices open. For India, the initiative could cut both ways: it may create demand for alternative suppliers, but Indian goods that rely on inputs from dominant suppliers may not count as diversified supply.

What is DiversifyEU?

The initiative follows from the December 2025 Joint Communication on Strengthening EU Economic Security, which identified supply chain resilience as one of six high-risk areas and committed the Commission to explore ways of encouraging companies in high-risk sectors to source from at least two suppliers (European Commission & High Representative, 2025)

What the call leaves open

The call sets out objectives and legal bases but leaves the main design choices open. Until these are settled, partner countries cannot readily judge whether, or how, they would be affected.

• Who is a dominant supplier
• Which sectors are critical
• Who is a trusted partner
• How dependency and circumvention are assessed
• What companies would have to do
• How tariffs would work
• How effects on partners are assessed

Should India be worried?

DiversifyEU names no country and is not aimed at India, but its effect on Indian exporters could cut both ways.

India is a plausible alternative source for EU buyers, and the Commission presents the EU–India FTA, concluded in January 2026, as a way to strengthen EU economic security by diversifying supply (European Commission, 2026b). Whether FTA status would count towards trusted-partner treatment is therefore of direct interest. At the same time, many Indian manufacturers depend on inputs from suppliers the EU may consider dominant.

What's next?

The consultation is India's main opportunity to inform the design before the text is fixed. Submissions from government, export promotion councils and industry could focus on three points:

• Objective, published criteria for identifying dominant suppliers and trusted partners, and the treatment of FTA partners.
• Recognition of substantial processing and value addition in third countries when dependency is assessed.
• Proportionate compliance requirements, with specific provision for SMEs.

Exporters in the sectors most likely to be covered would also benefit from mapping their upstream sourcing and ownership now.

DiversifyEU could position India as a preferred alternative supplier or treat some Indian goods as part of the dependency the EU seeks to reduce. Which outcome prevails will depend on choices the Commission has yet to make, and on the evidence it receives before making them.