- Boost to Indian exports and competitiveness — The pact would lower EU tariffs on labor-intensive Indian exports such as textiles, garments and jewelry, helping India recover market share lost after the EU withdrew GSP benefits and offset the impact of steep US tariffs.
- Strategic diversification for the EU — For Europe, the deal reduces dependence on China by strengthening supply-chain ties with India, while securing access to one of the world’s fastest-growing $4.2 trillion economies.
- Expanded market access on both sides — Indian IT services and professionals could gain improved entry into the EU, while European companies would benefit from tariff cuts in automobiles, machinery, chemicals and aircraft, sectors currently facing high barriers in India.
- Geopolitical signal amid protectionism — The agreement sends a strong message in favor of open trade and strategic alignment at a time when global protectionism and trade fragmentation are accelerating.
India and the European Union are close to concluding a long-delayed free trade agreement (FTA), with a formal announcement expected at the India–EU Summit in New Delhi on Tuesday, according to officials familiar with the talks.
If finalized, the agreement would mark a major strategic shift for both sides at a time of rising global protectionism and intensifying geopolitical uncertainty.
Once signed, the pact must be ratified by the European Parliament, a process expected to take at least a year. Recent resistance by EU lawmakers to other trade deals, including a challenge to the EU–South America pact, underscores the risk of political hurdles delaying approval, according to Reuters.
Investment protection and geographical indications (GIs) are being negotiated separately, narrowing the current deal’s scope to goods, services and trade rules.
The agreement could significantly boost Indian exports such as textiles, garments and jewelry, which have been under pressure since the United States imposed 50% tariffs on selected products last year.
For India, the pact would be its ninth trade agreement in four years, reinforcing New Delhi’s push to secure overseas markets as global trade barriers rise.
For the EU, the deal supports supply-chain diversification away from China and offers deeper access to India’s fast-growing $4.2 trillion economy, one of the world’s largest and most dynamic markets.
The EU is among India’s top trading partners, alongside the US and China. Total bilateral trade in goods and services exceeded $190 billion in 2024/25, with India exporting $76 billion in goods and $30 billion in services to the bloc.
While average EU tariffs on Indian goods are relatively low at 3.8%, labor-intensive sectors such as textiles and garments face duties of around 10%. The FTA would help restore competitiveness lost after the EU began withdrawing tariff preferences under the Generalized System of Preferences (GSP) in 2023.
India is also seeking greater market access for IT services and improved mobility for its professionals.
EU exports face much higher barriers in India, with an average tariff of about 9.3% on goods worth $60.7 billion in 2024/25.
Tariffs are particularly steep on automobiles, auto parts, chemicals and plastics. Reductions would open opportunities in cars, machinery, aircraft and chemicals, while improving access to services, procurement and investment.
Key sticking points
Agriculture and dairy have been excluded from negotiations. India is resisting EU demands to eliminate tariffs on more than 95% of goods, signaling a ceiling closer to 90%.
Sensitive sectors such as automobiles, wine and spirits remain unresolved, with India favoring phased tariff cuts or limited quotas to protect domestic manufacturing.
India is seeking “data-secure” status under EU rules, easier movement of professionals and relief from double social security payments.
The EU, meanwhile, wants broader access to India’s financial and legal services, along with stronger commitments on labor rights, environmental standards and intellectual property.
Two major concerns for India remain the EU’s carbon border levy, which could dilute tariff benefits, and high non-tariff barriers, including regulatory delays, strict standards and certification costs.
Analysts say global trade shocks and geopolitical pressures have pushed both sides toward a pragmatic compromise. Whether the pact delivers balanced gains will depend on how carbon measures, services mobility and non-tariff barriers are ultimately resolved.
