On January 27, India and the European Union are expected to announce the successful conclusion of negotiations for a free trade agreement.
This announcement regarding the FTA will take place during the India-EU Summit, according to a report from news agency PTI, citing a government official.
It has taken 18 years to finalize this pact, with discussions commencing in 2007, spanning two prime ministers, various trade commissioners, and several discontinued rounds of negotiations.
Commerce and Industry Minister Piyush Goyal has referred to it as the “mother of all deals.” European Commission President Ursula von der Leyen echoed this sentiment during the recent Davos Summit.
“We appreciate our shared commitment to a mutually beneficial and ambitious India-EU FTA for the prosperity of our businesses and citizens,” Goyal stated in a social media update.
The timing of the India-EU trade agreement is strategic, occurring amid a global trade shift due to US tariffs that have prompted supply chains to adapt, with Delhi and Brussels aiming to establish stability.
European Commission President Leyen, alongside European Council President Antonio Costa, is visiting New Delhi for four days to participate in Republic Day celebrations on January 26. They are scheduled to meet with Prime Minister Narendra Modi on January 27 for the summit.
Also Read: European Commission President Ursula von der Leyen arrives in Delhi
However, the deal will not be signed immediately. The text will undergo legal vetting, and ratification processes will vary; for the EU, this involves its parliament, while for India, it requires approval from the Union cabinet, suggesting that implementation will take some time.
What accounts for the deal’s timing?
As is typical for FTAs, the focus is on duties. Over 90% of traded goods will have import duties reduced or abolished. Labor-intensive sectors such as textiles and footwear will see immediate zero tariffs, while other products will experience gradual duty reductions over five, seven, or ten years, according to PTI.
Quota-based access will be implemented for autos and alcoholic beverages, similar to India’s agreements with Australia and the UK, while sensitive agricultural products will remain excluded.
The services sector will also see liberalization, including telecommunications, accounting, transportation, and auditing—fields where India currently outsources to Europe, and vice versa.
This forthcoming agreement represents India’s eighth trade pact since 2014, following deals with Australia, the UK, Oman, New Zealand, the UAE, the EFTA bloc, and Mauritius. Previous agreements with ASEAN, Japan, South Korea, Malaysia, SAFTA, and Singapore set a precedent, but the EU pact is the most significant, involving 27 developed nations, including France, Germany, Italy, Spain, and Nordic countries.
The US has imposed tariffs as high as 50%, which has altered trade routes and made diversification a practical necessity rather than a mere ideological choice. India aims to protect its exporters, decrease dependence on China, and engage more deeply with the EU market, which accounts for 17% of India’s export shipments. Conversely, the EU sends 9% of its exports to India.
Read More: Changes in EU tariffs could impact Indian textile exports competitively: Former WTO envoy Dasgupta
In 2024-25, trade in goods between India and the EU reached $136.53 billion—$75.85 billion in exports and $60.68 billion in imports—making the EU India’s largest trading partner. Services contributed an additional $83.10 billion during the same period, as reported by PTI.
Europe boasts a GDP of $20 trillion with a population of 450 million. It exports $2.9 trillion and imports $2.6 trillion annually. Meanwhile, India, with its 1.4 billion citizens, exported $437 billion in goods and $387.5 billion in services while importing $720 billion in goods and $195 billion in services.
Who benefits more from market access?
India seeks zero-duty access for textiles, leather goods, handlooms, and processed foods, while the EU is interested in gaining access to automobiles, wines, and high-tech products. Dairy products remain excluded to protect small-scale farmers, and the EU continues to restrict beef, sugar, and rice.
In fiscal year 2025, India’s exports to the EU were concentrated in petroleum ($15B), electronics ($11.3B; smartphones $4.3B), textiles ($4.5B in garments + $1.6B in textiles), machinery and computers ($5B), organic chemicals ($5.1B), iron and steel ($4.9B), gems and jewelry ($2.5B), pharmaceuticals ($3B), auto parts ($1.6B), footwear ($809M), and coffee ($775M). The imports were dominated by machinery and computers ($13B), electronics ($9.4B; mobile parts $3.7B; integrated circuits $890.5M), aircraft ($6.3B), medical devices and scientific instruments ($3.8B), gems and jewelry ($3B; rough diamonds $1.7B), and organic chemicals ($2.3B) and plastics ($2.3B).
The services trade follows a similar pattern: India exports IT, telecommunications, transportation, and business services while importing intellectual property services, telecom, and IT.
Since 2000, EU firms have invested $117.4 billion in India, accounting for 16.5% of total FDI, with around 6,000 European firms operating in the country. Indian foreign direct investment to the EU totals $40.04 billion.
