New Delhi: India and the European Union (EU) on Tuesday announced the conclusion of negotiations for their long-pending Free Trade Agreement (FTA). The deal covers trade with the 27-nation EU bloc and becomes India’s 19th trade agreement overall.
The FTA is expected to give a strong push to India’s exports, help diversify markets, and reduce reliance on a few global trade partners.
Why this FTA matters now?
The timing of the agreement is crucial. Global trade has been disrupted due to high tariffs imposed by the US, with India facing duties as high as 50% on certain goods. The EU is also dealing with similar trade pressures.
The India-EU FTA is expected to help exporters from both sides find new markets, reduce risks, and lower dependence on China.
How the FTA will help India?
Under the FTA, import duties will be reduced or eliminated on many goods. This will make Indian products more competitive in the European market.
Key Indian sectors likely to benefit include textiles, garments, leather, pharmaceuticals, steel, petroleum products, electrical machinery, and auto components. Lower duties could especially help labour-intensive sectors, where India currently faces higher tariffs than rivals like Bangladesh and Vietnam.
India’s services exports, such as IT, telecom, business services, and transport, are also expected to grow as rules become more aligned.
Benefits for the European Union
The EU is expected to gain from higher exports of aircraft and parts, electrical machinery, chemicals, and diamonds to India. European service sectors such as intellectual property, IT, and professional services may also see increased opportunities.
Trade relationship at present
The EU is India’s largest goods trading partner. Bilateral trade in goods stood at USD 136.5 billion in 2024-25. India exported USD 75.9 billion, while imports were USD 60.7 billion.
The EU accounts for about 17 percent of India’s total exports. Key EU destinations for Indian goods include Germany, Spain, Belgium, the Netherlands, and Poland.
Investment and FDI ties
The EU is also a major investor in India. Cumulative FDI inflows from the EU stood at USD 117.4 billion between April 2000 and September 2024. Around 6,000 EU firms operate in India, mainly from the Netherlands, Germany, and France.
A deal nearly two decades in the making
Negotiations began in 2007 but stalled in 2013 due to disagreements over automobiles, wines, data rules, and public procurement. Talks were relaunched in 2022, finally leading to the agreement.
