India and the European Union are close to concluding their long-delayed free trade agreement. (AI image)
In a historic first, India and the European Union are on the verge of a trade deal that took almost two decades to finalize. The scale of the proposed free trade deal is evident in Commerce Minister Piyush Goyal’s description of the FTA – he called it the “mother of all deals”. “I have concluded seven deals so far. All with developed economies. This one will be the mother of them all,” Goyal said a few days ago.India and the European Union are on the verge of concluding their long-delayed free trade agreement, as negotiations enter their home stretch after nearly 18 years. A formal signing of the trade deal is expected around January 26-27, when senior EU leaders will visit India. The trade deal is expected to be announced at the 16th India-EU summit in New Delhi.
The deal is now officially called the India-EU Free Trade Agreement, replacing the previous Comprehensive Trade and Investment Agreement label that was used since negotiations began in 2007.
India-EU trade dynamics
If concluded, the India-EU FTA would mark India’s ninth trade deal in the last four years, adding to a growing list that includes agreements with Mauritius, the United Arab Emirates, Australia, New Zealand, Oman, the EFTA bloc, the United Kingdom and partners in the Indo-Pacific economic framework.
India-EU Free Trade Agreement: what are the benefits for India?
Once finalized, the deal would become India’s largest free trade agreement in terms of economic scale and regulatory coverage. It would provide preferential access to the 27 EU member states through a single framework, with the EU operating as a customs union.According to an analysis by the Global Trade Research Initiative (GTRI), for India, the proposed deal opens the door to one of the world’s richest and most trusted economic blocs, the European Union, with an estimated GDP of 18-22 trillion and a market spanning around 450 million high-income consumers. GTRI highlights an important point: the India-EU free trade agreement is on the verge of completion, not because long-standing differences have disappeared, but because changing geopolitical realities have forced both sides to adopt a more pragmatic approach. The deal is of particular importance because of its timing, given the trade war unleashed by US President Donald Trump. While the EU now faces new 10% tariffs from the US, which could go as high as 25%, India has already been hit with 50% tariffs on its exports to America.In fiscal 2025, India exported goods worth around $76 billion to the EU and imported around $61 billion, generating a trade surplus. However, the withdrawal of the EU’s Generalized System of Preferences in 2023 has weakened the competitiveness of several Indian exports. Average EU tariffs on Indian goods are already relatively modest: around 3.8 percent on exports of $75.9 billion in fiscal 2025. However, labor-intensive sectors, such as textiles and clothing, continue to face tariffs close to 10 percent. “Removing these tariffs would lead to clear export gains. An FTA would restore lost market access, reduce tariffs on key exports such as clothing, pharmaceuticals, steel, petroleum products and machinery, and help Indian companies better absorb shocks from rising US tariffs,” GTRI founder Ajay Srivastava said.Equally important, increased opening of the services market, particularly in the IT and other skills-driven segments, would enable India to capitalize on its vast talent base, increase its services exports to Europe, and reduce its dependence on the United States. walk.Negotiations on the India-EU free trade agreement cover a large and complex agenda, with goods and services at the heart of unresolved differences. The EU is pressuring India to eliminate tariffs on more than 95% of imports, while New Delhi is ready to move closer to 90%, keeping agriculture and dairy out of the scope. At the same time, India stands to gain from greater access to labor-intensive exports such as textiles, clothing, leather and auto components, which currently face higher EU tariffs than their competitors.
Goods exports from India to the EU
In the services sector, India opposes EU requirements for local presence, high salary thresholds and restrictions on remote delivery, while seeking data adequacy status, easier visas, social security coordination and recognition of qualifications. The EU, in turn, is demanding greater access to India’s financial, legal and banking sectors, as well as commitments on data protection.Addressing the Carbon Border Adjustment Mechanism (CBAM) issue is a priority for India, as it threatens to dilute the gains from any tariff reductions. The EU’s carbon border adjustment mechanism, which is already applicable to products such as steel and aluminum, effectively imposes an additional burden on Indian exports, even if tariffs are removed under the FTA. This impact is particularly severe for MSMEs, as they face high compliance costs, complex disclosure obligations and the risk of sanctions based on default emissions values that may overestimate true carbon intensity. Beyond tariffs, Indian exporters face a wide range of non-tariff barriers in the EU that often erode the benefits of market openness. These include delays in pharmaceutical approvals, strict sanitary and phytosanitary requirements affecting food and agricultural exports such as buffalo meat, and complex testing, certification and conformity assessment procedures. Agricultural products like basmati rice, spices and tea are frequently rejected or subjected to intensive inspection following steep reductions in permitted pesticide residue limits, while seafood exports face higher sampling rates due to concerns over antibiotic use.
What will be the benefits for the European Union?
GTRI notes that for the European Union, a trade deal with India offers access to a scale, growth and sustained demand that is increasingly rare in Europe. India, with an economy of around $4.2 trillion and a population of 1.4 billion, is one of the world’s fastest-growing major economies but remains protected by relatively high tariff and regulatory barriers. European exports to India face much greater hurdles, with a weighted average tariff of around 9.3% on shipments worth $60.7 billion. Some sectors face particularly heavy taxes, including automobiles and their components at around 35.5 percent, plastics at 10.4 percent, and chemicals and pharmaceuticals at around 9.9 percent, all of which increase entry costs for EU businesses.
India’s goods imports from the EU
Lowering these barriers would significantly improve market access. An FTA would create significant opportunities for European exporters in areas such as aircraft, machinery, chemicals and other high-value manufactured goods, while also expanding access to services, government procurement and investment. Beyond trade, deeper economic engagement with India supports the EU’s strategic objective of diversifying supply chains, reducing over-reliance on China, and establishing a long-term economic and geopolitical foothold in one of Asia’s fastest-growing major economies.
Conclusion
According to GTRI, the India-EU FTA has the potential to reshape India’s trade relations with Europe and anchor long-term export growth, investment flows and supply chain integration. “This offers clear gains in goods trade, particularly for labour-intensive sectors in a world of increasing protectionism. At the same time, unresolved issues – including CBAM, service mobility and non-tariff barriers – present significant imbalance risks,” it says.“Whether the deal ultimately becomes a growth-enhancing partnership or a strategically asymmetric deal will depend on how these final issues are resolved,” he concludes.
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