India and the European Union are in the final stages of negotiating a long-pending free trade agreement (FTA). The deal could significantly boost India’s exports to the 27-nation 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 its most consequential, given the EU’s position as India’s largest trading partner for goods. The agreement is expected to help Indian exporters diversify markets at a time when high US tariffs and geopolitical tensions are reshaping global supply chains.
Why India-EU FTA matters?
The push for the agreement has gained urgency as steep US tariffs, reaching as high as 50%, have disrupted global trade flows. For India, the FTA offers a strategic opportunity to reduce dependence on China, expand exports to Europe and cushion the impact of protectionist policies elsewhere.Tariffs or import duties are either reduced or eliminated under FTAs, allowing easier 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. Labour-intensive sectors like garments, leather and pharmaceuticals could see improved competitiveness in the EU market, while Indian services exports, particularly telecommunications, transport, and business services, are also expected to grow.According to think tank GTRI, the EU stands to gain from higher exports of aircraft and parts, electrical machinery, diamonds and chemicals to India. European services such as intellectual property, IT, telecommunications and business services may also see expanded access.
Trade ties at a glance
India’s bilateral trade in goods with the EU stood at USD 136.53 billion in 2024–25, comprising USD 75.85 billion in exports and USD 60.68 billion in imports, making the EU India’s largest goods trading partner.The EU accounts for around 17% of India’s total exports, while India represents about 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 about USD 19.5 trillion and a population exceeding 450 million, the EU remains a major global trade player. India, meanwhile, exported USD 437 billion in goods and USD 387.5 billion in services in 2024–25, while importing goods worth USD 720 billion and services worth USD 195 billion.
Key exports, imports and tariff challenges
India’s major exports to the EU include petroleum products, electronics (including smartphones), textiles, machinery, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals and auto 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 agreements.India’s main imports from the EU include machinery, aircraft and parts, electronics, medical devices, scientific instruments, rough diamonds, chemicals, plastics, cars and auto components. In services, India exports business, IT, telecom and transport services, while importing intellectual property and IT-related services.
Alcohol trade and investment flows
Alcohol is another significant component of bilateral trade. In 2023–24, India exported wines worth USD 1.5 million and spirits worth USD 64.9 million to the EU, while importing wines worth USD 412.4 million and spirits worth USD 22.3 million.On the investment front, cumulative FDI inflows from the EU into India between April 2000 and September 2024 stood at USD 117.4 billion, accounting for 16.6% of India’s total FDI equity inflows. Around 6,000 EU companies operate in India.India’s outward FDI to the EU was valued at about USD 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 final stage
India-EU FTA talks began in 2007, with multiple negotiation rounds held until 2013. However, differences over tariffs on automobiles, wine and spirits, data security for Indian IT firms, intellectual property rights, labour standards and public procurement led to a deadlock.While efforts to revive talks between 2016 and 2020 made limited progress, momentum returned after 2020. In June 2022, India and the EU formally re-launched negotiations covering a Free Trade Agreement, an Investment Protection Agreement and an Agreement on Geographical Indications.
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