India and European Union Conclude Free Trade Agreement Negotiations After Long Talks

India and the European Union on Tuesday announced the conclusion and finalisation of negotiations for a proposed free trade agreement. The development marks a significant milestone in India’s trade diplomacy and represents the country’s 19th trade pact.

The agreement is expected to strengthen India’s export presence across the 27 member European bloc and deepen economic ties between the two sides.

India’s Expanding Trade Agreement Network​

Since 2014, India has finalised seven trade pacts. These include agreements with Mauritius, Australia, the United Arab Emirates, Oman, the United Kingdom, the European Free Trade Association comprising Switzerland, Iceland, Liechtenstein and Norway, and New Zealand. Several of these agreements have already been implemented, while others have been signed or concluded in recent years.

Why the India EU FTA Matters​

The conclusion of the India EU free trade agreement comes at a time when global trade flows have been disrupted by high tariff regimes imposed by the United States. India is facing tariffs of up to 50 percent, while the EU is also exposed to similar risks.

The agreement is expected to help Indian exporters diversify shipments, reduce dependence on China, and mitigate the impact of restrictive trade policies in other markets.

Key Benefits for India and the European Union​

Under a free trade agreement, tariffs and import duties are either reduced or eliminated. The India EU FTA is expected to open markets, align regulatory frameworks, and support growth across several sectors.

Lower or zero import duties are likely to enhance the competitiveness of Indian exports in the EU, particularly in labour intensive industries such as garments, leather, pharmaceuticals, steel, petroleum products, and electrical machinery.

Indian services exports including telecommunications, business services, and transport services are also expected to see strong growth.

From the EU’s perspective, higher exports of aircraft and parts, electrical machinery, diamonds, and chemicals to India are expected. European service sectors such as intellectual property, business services, information technology, and telecommunications may also benefit.

Bilateral Trade Overview​

India’s bilateral trade in goods with the EU stood at USD 136.53 billion in 2024 to 25, with exports worth USD 75.85 billion and imports at USD 60.68 billion. This makes the EU India’s largest goods trading partner.

The EU accounts for about 17 percent of India’s total exports, while exports to India constitute around 9 percent of the EU’s total overseas shipments.

In 2023 to 24, India exported USD 76 billion worth of goods and USD 30 billion in services to the EU. During the same period, the EU exported USD 61.5 billion in goods and USD 23 billion in services to India.

Within the EU, Spain, Germany, Belgium, Poland, and the Netherlands are key destinations for Indian exporters.

India’s Major Exports and Imports​

India’s key exports to the EU include petroleum products such as diesel and aviation turbine fuel, electronics including smartphones, textiles, machinery and computers, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals, and auto components.

Currently, Indian textile exports to the EU face tariffs ranging from 12 to 16 percent, making them less competitive compared to countries like Bangladesh and Vietnam that enjoy preferential access under EU trade agreements.

Major imports from the EU include machinery, computers including turbojets, electronics including mobile phone parts and integrated circuits, aircraft, medical devices, scientific instruments, rough diamonds, organic chemicals, plastics, iron and steel, cars, and auto parts.

In services trade, India mainly exports business services, telecommunications and IT, and transportation services to the EU, while imports are led by intellectual property services and telecommunications and IT services.

Alcohol Trade Between India and the EU​

Both India and the EU are active players in the alcohol trade segment. In 2023 to 24, India exported wines worth USD 1.5 million and spirits including blended whiskies, vodka, brandy, and liqueurs worth USD 64.9 million to the EU.

Imports from the EU during the same period included wines valued at USD 412.4 million and spirits such as blended whiskies, brandy, gin, tequila, vodka, and liqueurs worth USD 22.3 million.

Foreign Direct Investment Flows​

India’s cumulative foreign direct investment inflows from the EU between April 2000 and September 2024 totalled USD 117.4 billion. Around 6,000 EU companies are currently operating in India.

FDI from the EU accounts for 16.6 percent of India’s cumulative FDI equity inflows of USD 708.6 billion.

India’s outward FDI to the EU amounted to approximately USD 40.04 billion between April 2000 and March 2024.

Major FDI inflows into India from EU countries include the Netherlands at USD 55 billion, Germany at USD 15.4 billion, France at USD 12 billion, Spain at USD 4.3 billion, Belgium at USD 4.1 billion, Italy at USD 3.65 billion, Sweden at USD 2.8 billion, Denmark at USD 1.44 billion, and Poland at USD 788.75 million.

A Negotiation Process Spanning Nearly Two Decades​

The India EU free trade agreement negotiations began in 2007. Between 2007 and 2013, multiple rounds were held but were stalled by disagreements over market access, intellectual property rights, labour standards, and sustainable development.

By 2013, talks had effectively stalled due to differences on tariffs for automobiles, wine and spirits, data security for Indian IT firms, and public procurement.

Although attempts were made to revive discussions between 2016 and 2020, meaningful progress remained limited. Renewed momentum emerged after 2020, leading to the relaunch of negotiations in June 2022.

These talks covered a free trade agreement, an investment protection agreement, and an agreement on geographical indications. Negotiations on the geographical indications pact and a bilateral investment treaty are currently ongoing.