Tit recently concluded a free trade agreement, or FTA, between India and the European Union. unprecedented. Few bilateral deals in modern commercial diplomacy can match the scale or ambition of what the “mother of all deals” has unlocked.
The numbers alone justify the enthusiasm. The deal is expected to double EU exports to India by 2032, with tariffs removed or reduced on 96.6 percent of EU products entering the Indian market. In return, the EU will liberalize customs duties on 99.5 percent of Indian products over a period of seven years. Once ratified by the European Parliament, official signing is expected later this year, with entry into force planned for early 2027.
The next test will lie in the impetus given to the modernization of India’s manufacturing industry and infrastructure, should the bilateral investment treaty follow and investments abound.
View full article
As the initial euphoria sets in and the hard legal work of translating political intent into binding text begins, some broader implications of this India-EU FTA should be discussed.
In particular, there is a arrangement with a cousin—born not from the “mother of all deals” itself, but from the EU’s existing trade architecture.
New Delhi must now understand and engage with the EU customs union with Turkey and its implications.
Also read: The India-EU FTA will change the way the United States views trade with New Delhi. We must be ready
Customary customs union
In recent years, Turkey has featured heavily in Indian strategic discourse for the wrong reasons. Erdoğan’s support for Pakistan in the internationalization of Kashmir, Turkey’s growing defense industry synergies with Pakistan and Bangladesh, and his role in fueling hostile narratives against India – particularly after Operation Sindoor – have placed Ankara in an almost uniformly negative light of discomfort, distrust and strategic concern in New Delhi.
The signing of the India-EU deal, however, provides India with a different opportunity to re-examine the Turkey issue – this time with more nuance and, for a change, from an economic and trade perspective.
This issue was the subject of expert discussions held recently in New Delhi at a conference on India-EU relations in a multipolar world, co-organized by CSDR and St Antony’s College, University of Oxford. Coinciding with the EU-India summit, experts discussed how India intends to approach the existing customs union between the EU and Turkey. Does the India-EU FTA create unintended exposure to Indian markets or vice versa? Are there risks of trade diversion or hidden advantages for non-European partners?
This brings us to the question: are there opportunities that India could exploit?
To answer these questions, we must first understand what a customs union is and why Turkey is particularly asymmetrical in its relations with the West.
Created in 1968, the EU The customs union is a fundamental pillar of European economic integration. It eliminates customs duties between members, establishes a common external tariff for goods entering the union and allows for smooth internal trade. It also serves broader objectives, such as protecting consumers, facilitating innovation and strengthening the EU’s position in global trade.
Although it is primarily an EU construct, three non-EU countries have joined the customs union with the bloc: Turkey, Andorra and San Marino. This regime allows the free movement of specific categories of goods, different for each case, without customs duties. They do not, however, confer decision-making powers or wider market access comparable to EU membership or the benefits of FTAs signed by the EU.
Also read: India-EU agenda can fundamentally alter global geopolitics – if Europe stands up to Trump
A half-union and complicated commitments
Turkey customs union with the EU entered into force on January 1, 1996, by virtue of Decision No. 1/95 of the EC-Türkiye Association Council. This decision was itself anchored in the Ankara Agreement of 1963. This arrangement required Turkey to adopt EU policies Common external tariff and align its commercial policy with that of Brussels for goods covered by the formalities.
The customs union was never intended as a permanent objective in itself. It was designed as a transitional stage towards possible membership of the EU. Nearly three decades later, Turkey remains outside the EU, with accession negotiations effectively frozen since 2018 due to ongoing concerns over democratic backsliding, rule of law and human rights violations under Recep Tayyip Erdoğan.
Despite this political impasse, Turkey economic integration with Europe remains reasonably deep. The customs union played an important role in Turkey’s industrial modernization and export growth, ultimately making Ankara the EU’s largest trading partner. At the same time, the deal remains structurally limited, if not flawed: Turkey must align with EU trade policy without having a seat at the table, creating imbalances and constraints, particularly as the global trade landscape evolves.
Also read: The EU is evolving to become a security actor. This opens new doors for India
An uncomfortable conversation?
Under the new India-EU agreement, Indian products benefit from preferential access not only to EU markets, but also to the markets of countries with customs union agreements with the EU, including Turkey (as well as Andorra and San Marino). However, the reverse does not apply. Turkish products do not enjoy any preferential access in India simply because Turkey is part of the EU customs union.
This asymmetry is fundamental. Turkey must match EU external tariffs, but it cannot take advantage of EU FTAs with third countries, such as India, for its own exports unless India agrees separately.
For now, this dynamic works in India’s favor. However, negotiations on updating the EU-Türkiye customs union were launched a few years ago and have following until 2026, with Ankara pushing for an expanded scope including services, agriculture and public procurement. No breakthrough has yet occurred, but that is not to say it will never happen.
Remember, in the event of a diminished or even antagonistic role for the United States in NATO, Turkey has the largest ground forces in the alliance and remains a strong supporter of Ukraine, with reasonable influence in Russia.
It makes sense for Brussels to keep Turkey actively engaged in the European system, even without full membership, which of course seems impossible under Erdoğan.
Indo-Turkish trade has seen steady growth despite political tensions. In FY25, bilateral trade reached around $10 billion, heavily skewed in favor of India. Indian exports dominate the relationship, and this surplus is likely to widen as the India-EU FTA comes into effect next year. Indian companies have already invested around $126 million in Türkiye, while Turkish investments in India stand at $210.47 million.
Paradoxically, this creates an opening for India.
Also read: Wines, precious stones and surgical equipment should become cheaper. The big gains for India and the EU from a historic FTA
Pragmatic compartmentalization
Indian authorities have confirmed that there is no immediate danger of Turkish products flooding Indian markets through the EU backdoor. This fear is misplaced. But there East a strategic opportunity for India to use the India-EU FTA as a structured channel to recalibrate its economic engagement with a difficult but consequential partner.
The rationale here is not naive “good guy,” nor is it an argument to downplay Turkey’s growing defense industrial footprint in Pakistan and Bangladesh (and soon, perhaps Sri Lanka too).
The justification for pragmatism rests instead on strategic realism. Commercial engagement can act as a stabilizer, a way to balance hostile energies in an unstable geopolitical period and prevent further strategic drift in India’s neighborhood.
If Turkey succeeds in modernizing its customs union with the EU to make it more comprehensive and economically viable, Indian exporters will benefit even more. What remains to be determined are the advantages that such modernization could bring to Ankara over India. At a time when India already enjoys a surplus with Ankara, it would be advantageous to use it as leverage and not as a vulnerability.
The last argument is perhaps the most convincing.
India continues to have a complex and compartmentalized relationship with China despite a $113 billion trade deficit, deep supply chain dependencies in critical sectors and Beijing’s active support for Pakistan – including during Operation Sindoor – in addition to the challenges faced in the LAC region.
If New Delhi can take a pragmatic, interest-based approach with Beijing under much more unfavorable conditions, there is little reason not to do the same with a smaller, more nimble Ankara.
Allowing India’s neighbors to drift further into Turkey’s orbit would only reinforce President Erdoğan’s anti-India narrative. Commitment, on the other hand, would create more options. In this sense, the India-EU FTA, in its scope and scale, goes beyond a simple trade agreement.
Swasti Rao is a consulting editor (international and strategic affairs) at ThePrint. She tweets @swasrao. Opinions are personal.
(Edited by Prashant Dixit)
About The Author
