India and the European Union are in the final stages of negotiating a long-pending free trade agreement (FTA). The deal could significantly increase Indian exports to the 27-country bloc and deepen economic ties amid global trade disruptions.If signed, the India-EU FTA will become India’s 19th trade agreement and one of the largest, given the EU’s position as India’s largest trading partner for goods. The deal is expected to help Indian exporters diversify their markets at a time when high U.S. tariffs and geopolitical tensions are reshaping global supply chains.
Why is the India-EU FTA important?
Pressure for a deal has grown urgent as high U.S. tariffs, reaching up to 50%, have disrupted global trade flows. For India, the FTA offers a strategic opportunity to reduce its dependence on China, increase its exports to Europe and cushion the impact of protectionist policies elsewhere.Customs duties or import duties are either reduced or eliminated under FTAs, facilitating market access and regulatory alignment. The India-EU deal is expected to benefit sectors such as technology, pharmaceuticals, automobiles, textiles, steel, petroleum products and electrical machinery, according to PTI. Labor-intensive sectors such as clothing, leather and pharmaceuticals could see their competitiveness improved in the EU market, while Indian exports of services, particularly telecommunications, transport and business services, are also expected to grow.According to think tank GTRI, the EU stands to gain from increased exports of aircraft and parts, electrical machinery, diamonds and chemicals to India. European services such as intellectual property, IT, telecommunications and business services could also benefit from expanded access.
Commercial links in brief
India’s bilateral merchandise trade with the EU stood at USD 136.53 billion in 2024-25, including USD 75.85 billion in exports and USD 60.68 billion in imports, making the EU India’s largest merchandise trading partner.The EU accounts for around 17% of India’s total exports, while India accounts for around 9% of the bloc’s overseas shipments. In 2023-24, India exported USD 76 billion in goods and USD 30 billion in services to the EU, while EU exports to India included USD 61.5 billion in goods and USD 23 billion in services.Spain, Germany, Belgium, Poland and the Netherlands are among the top EU destinations for Indian exports.With a GDP of around $19.5 trillion and a population of over 450 million, the EU remains a major player in global trade. India, on the other hand, exported $437 billion worth of goods and $387.5 billion worth of services in 2024-25, while importing $720 billion worth of goods and $195 billion worth of services.
Main challenges related to exports, imports and tariffs
India’s main exports to the EU include petroleum products, electronics (including smartphones), textiles, machinery, organic chemicals, iron and steel, gems and jewelry, pharmaceuticals and automobile parts.However, Indian textile exports currently face tariffs of 12-16% in the EU, making them less competitive than products from countries like Bangladesh and Vietnam, which enjoy preferential access under EU trade deals.India’s main imports from the EU include machinery, aircraft and their parts, electronics, medical devices, scientific instruments, rough diamonds, chemicals, plastics, cars and automobile components. In the services sector, India exports business, IT, telecommunications and transportation services, while importing intellectual property services and IT services.
Alcohol trade and investment flows
Alcohol is another important element of bilateral trade. In 2023-24, India exported wines worth $1.5 million and spirits worth $64.9 million to the EU, while it imported wines worth $412.4 million and spirits worth $22.3 million.On the investment front, cumulative FDI flows from the EU to India between April 2000 and September 2024 amounted to $117.4 billion, or 16.6% of total FDI flows into India. Around 6,000 European companies operate in India.Outward FDI from India to the EU was valued at around $40.04 billion between April 2000 and March 2024. The Netherlands, Germany, France, Spain and Belgium are among the largest EU investors in India.
A long road to the last step
Negotiations on an FTA between India and the EU began in 2007, with several rounds of negotiations until 2013. However, differences over tariffs on automobiles, wine and spirits, data security of Indian IT companies, intellectual property rights, labor standards and government procurement have led to an impasse.While efforts to restart negotiations between 2016 and 2020 made little progress, momentum returned after 2020. In June 2022, India and the EU formally restarted negotiations on a free trade agreement, an investment protection agreement, and a geographical indications agreement.
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