New Delhi, Jan 13 (PTI) India and the European Union are in the final phase of negotiations on a free trade agreement (FTA) that is expected to substantially boost India’s exports to the 27-nation bloc and deepen bilateral economic ties. Once concluded, it will become India’s 19th trade agreement and one of its most strategically important, given the size of the EU market.
Since 2014, India has finalised seven trade pacts with Mauritius, Australia, the UAE, the UK, Oman, New Zealand and the European Free Trade Association (EFTA). The India-EU FTA assumes added significance amid global trade disruptions caused by high US tariffs, including duties of up to 50 per cent faced by Indian exporters. The deal is expected to help India diversify export markets and reduce dependence on China.
Under the proposed FTA, tariffs and import duties will be reduced or eliminated, improving market access and regulatory alignment. Key Indian sectors such as technology, pharmaceuticals, automobiles, textiles and other labour-intensive industries stand to benefit. Lower duties will make exports of garments, leather goods, pharmaceuticals, steel, petroleum products and electrical machinery more competitive in Europe. Indian services exports—particularly telecommunications, business and transport services—are also expected to expand.
The EU is likely to gain from higher exports of aircraft and parts, electrical machinery, diamonds and chemicals to India. European services, including intellectual property, IT, telecommunications and business services, are also projected to benefit, according to think tank GTRI.
Bilateral trade between India and the EU is already robust. In 2024-25, two-way trade in goods stood at USD 136.53 billion, with India exporting USD 75.85 billion and importing USD 60.68 billion, making the EU India’s largest goods trading partner. The EU accounts for about 17 per cent of India’s total exports, while India represents around 9 per cent 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 the EU exported USD 61.5 billion in goods and USD 23 billion in services to India. Germany, Spain, Belgium, Poland and the Netherlands are among the key EU destinations for Indian exports.
The EU, with a GDP of about USD 19.5 trillion and a population of over 450 million, is a major global trading power. India, with a population of 1.4 billion, exported USD 437 billion in goods and USD 387.5 billion in services in 2024-25, while importing USD 720 billion in goods and USD 195 billion in services.
India’s major exports to the EU include petroleum products, electronics, textiles, machinery, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals and auto components. Currently, Indian textile exports face tariffs of 12–16 per cent, making them less competitive than products from countries like Bangladesh and Vietnam, which enjoy preferential access. India’s key imports from the EU include machinery, electronics, aircraft, medical devices, scientific instruments, diamonds, chemicals, plastics and automobiles. In services, India exports business, IT, telecom and transport services, while importing intellectual property-related and IT services.
Alcohol trade also features in bilateral commerce. In 2023-24, India exported wines worth USD 1.5 million and spirits worth USD 64.9 million to the EU, while imports of wines and spirits from the bloc were significantly higher.
Foreign direct investment remains a strong pillar of India-EU ties. Cumulative FDI inflows from the EU into India between April 2000 and September 2024 stood at USD 117.4 billion, accounting for 16.6 per cent of total FDI equity inflows, with around 6,000 EU companies operating in India. Indian FDI outflows to the EU were valued at about USD 40.04 billion between April 2000 and March 2024, led by investments in countries such as the Netherlands, Germany and France.
Negotiations for the India-EU FTA began in 2007 but stalled in 2013 due to differences over market access, tariffs on automobiles and alcohol, intellectual property rights, data security, labour standards and public procurement. After limited progress between 2016 and 2020, talks were formally relaunched in June 2022, covering a free trade agreement, an investment protection pact and an agreement on geographical indications.
With talks now nearing completion, the proposed FTA is widely seen as a potential game-changer for India’s export growth and its long-term economic partnership with Europe.
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