At a video conference held underneath the threat of the Covid-19 pandemic, the EU and India decided on Saturday to reactivate long-stalled trade talks in a big effort to strengthen relations.

“The EU and India are beginning a new chapter in our alliance. We are the world's two most populous democracies. “We are perfect companions”, said European Council President Charles Michel.

The crippling surge of infections that has swept India has affected the summit, prompting Prime Minister Narendra Modi to cancel plans to travel to Portugal to speak with his European counterparts.

The 27-nation bloc and the world's largest democracy appears determined to capitalize on the increasing impetus for stronger cooperation, which is sparked by mutual fears over China's growing power.

Ursula von der Leyen, President of the European Commission, called the initiative to reopen trade negotiations following an eight-year hiatus a "landmark moment."

“I am confident that we would be able to take a significant move forward because the EU and India have a strong friendship, but there is still a lot of unused possibilities,” said European Commission President Ursula von der Leyen.

As part of foreign measures to assist India in combating the influx of COVID-19 cases, EU countries already sent medical equipment and medicines worth an estimated 100 million euros ($120 million).

Von der Leyen insisted that the EU "stands squarely by India in this most difficult moment" and promised that "further support would surely arrive."

According to a top executive in India's External Affairs Ministry, Modi persuaded the EU to accept an Indian and South African request to terminate COVID-19 vaccine patents after US Vice President Joe Biden backed the initiative.

EU leaders have voiced skepticism about the proposal, arguing that the first step should be for countries to open up to the possibility of selling doses.

“We would be keeping an eye on the changing EU stance on this specific issue,” said senior Indian official Vikas Swarup.

The two vaccine-producing juggernauts did plan to continue to collaborate to ensure global stocks are sustained and the world is adequately equipped for future epidemics.

“We concluded that overcoming the COVID-19 pandemic by global collaboration and unity continues our top priority, and we reaffirmed our commitment to working together to achieve a stronger, cleaner, more secure, and inclusive recovery,” according to a joint statement.

Although the pandemic threw a shadow on the gathering, the main statement was the resumption of negotiations for a comprehensive free trade agreement, which had been stalled since 2013.

The two parties decided to begin separate talks on separate agreements to secure assets and regionally relevant goods at the same time.

They have agreed to an “interconnection” alliance to strengthen infrastructure ties and stated that they will work harder to collaborate on emerging cutting-edge technologies such as artificial intelligence.

The trade talks were suspended after they were bogged down on topics such as tariff reductions and entry for Indian jobs to Europe.

There is no deadline for when the new talks will commence.

It needs to be seen whether India is now able to abandon an agenda that the EU regards as strongly protectionist to close a contract this time.

The resentments with China could provide a new catalyst for negotiations, with one diplomat referring to Beijing as "the elephant in the room." The EU's drive comes as plans to approve an investment agreement reached with China have stalled due to tit-for-tat measures.

Britain's exit from the EU has also produced a new competitor for Brussels, as London seeks to expand trade with India.

The British government announced on Tuesday that substantive free trade negotiations with India would begin later this year, following the agreement of an initial arrangement to improve investment and trade.

Independently, S&P Global Ratings predicts a daily loss of $210 million in production in India following the second Covid wave in April-June in a worst-case scenario design. In a mild example, pandemic spikes end in May, with mobility 25 to 30% lower than average before returning to normal by September.

In a worst-case situation, the pandemic spikes in late June decreases slowly, and mobility is 40% smaller than average by the end of the year. The initial impact spreads through the economy by different outlets, resulting in poorer labor markets and weaker household incomes. According to S&P Global Ratings, the GDP growth result for January-March 2021 will have a major impact on the growth number for FY 21/22. According to the survey, the policy room is limited by inflation near the top of the central bank's target limit.

Core inflation is still sticky and strong, with the most recent March reading of 6.0 %. Short and long-term interest rates are extremely low. Monetary policy relaxation is expected to be aimed at particular industries such as SMEs, with a greater emphasis on quantity variables, according to the study.

“We expect the Indian government's fiscal deficit to be about 14% of GDP in fiscal 2021, bringing the country's net debt stock to just over 90% of GDP. Through March, India's nascent economic recovery strengthened government income. The rapidly emerging medical emergency could disrupt momentum, as per S&P Global Ratings.