FTA with EU to help boost India’s exports to 27-nation bloc

India and the European Union (EU) on Tuesday announced the conclusion and finalisation of negotiations for the proposed free trade agreement (FTA). This will be the 19th trade deal for India. The FTA will help boost the country’s exports to the 27-nation bloc.Since 2014, India has finalised seven trade pacts — Mauritius (April 2021 implemented), Australia (December 2022 implemented), UAE (May 2022 implemented), Oman (signed in December 2025), UK (signed in July 2025), EFTA (implemented in October 2025 — Switzerland, Iceland, Liechtenstein, Norway), and New Zealand (talks concluded in December 2025).

Importance of this FTA

The imposition of high tariffs by the US has disrupted the global flow of goods. India is facing steep 50 per cent tariffs. The FTA is expected to help Indian exporters diversify their shipments. It will also help reduce dependence on China. The EU is also facing a threat of high US tariffs.

Benefits for India and the EU

Tariffs or import duties are either reduced or eliminated under an FTA. Therefore, an FTA will open markets, align regulatory frameworks, and benefit key industries such as technology, pharmaceuticals, automobiles, and textiles.

Lower or zero import duties will make Indian exports, including from labour-intensive sectors, such as garments, leather, pharmaceuticals, steel, petroleum products, and electrical machinery, more competitive in the EU.

Similarly, Indian services exports, including telecommunications, business services, and transport, are also expected to grow significantly. According to think tank GTRI, the EU will benefit from higher exports of aircraft and parts, electrical machinery, diamonds, and chemicals to India. European service sectors such as intellectual property, business services, and IT and telecommunications may also see gains.

Bilateral trade

India’s bilateral trade in goods with the EU was $136.53 billion in 2024-25 (exports worth $75.85 billion and imports worth $60.68 billion), making the EU India’s largest goods trading partner. The EU market accounts for about 17 per cent of India’s total exports, and the bloc’s exports to India constitute 9 per cent of its total overseas shipments.

In 2023-24, India exported $76 billion in goods and $30 billion in services to the EU, while the EU exported $61.5 billion in goods and $23 billion in services to India. Within the EU, Spain, Germany, Belgium, Poland and the Netherlands are key destinations for Indian exporters.

India’s exports and imports

Major exports are petroleum products (Diesel and ATF), electronics (including smartphones), textiles, machinery and computers, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals, and auto parts. Currently, India’s textile exports to the EU face tariffs of 12-16 per cent, making Indian products less competitive than those from countries like Bangladesh and Vietnam, which enjoy preferential market access under EU trade agreements, a GTRI report said.

Main imports are 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.India’s key services exports to the EU are business services, telecommunications and IT, and transportation services, while imports are intellectual property services and telecommunications and IT.

Alcohol trade

Both regions are key players in this segment. India’s exports to the EU in 2023-24 included wines ($1.5 million), blended whiskeys, vodka, brandy, and liqueurs ($64.9 million). Imports included wines ($412.4 million), blended whiskeys, brandy, gin, tequila, vodka, and liqueurs ($22.3 million).

FDI inflows

India’s cumulative FDI inflows from the EU from April 2000 to September 2024 totalled $117.4 billion, with about 6,000 EU firms operating in India. FDI from the EU accounted for 16.6 per cent of the cumulative FDI equity inflows from all countries, which stood at $708.6 billion.

 According to GTRI, India’s FDI outflows to the EU totalled about $40.04 billion from April 2000 to March 2024. India mainly receives FDI from the Netherland ($55 billion) during April 2000 and September 2025), Germany ($15.4 billion), France ($12 billion), Spain (4.3 billion), Belgium ($4.1 billion), Italy (3.65 billion), Sweden ($2.8 billion), Denmark ($1.44 billion), and Poland ($788.75 million).

Long negotiations

The India-EU FTA negotiations began in 2007. Initially, from 2007 to 2013, multiple rounds of negotiations took place but were hindered by disagreements over market access, intellectual property rights, labour standards, and sustainable development. By 2013, the talks hit a standstill, particularly due to differences over tariffs on automobiles, wine, spirits, data security for Indian IT firms, and public procurement. Despite efforts to revive negotiations between 2016 and 2020, substantial progress remained elusive. However, post-2020, both India and the EU showed renewed interest in resuming talks. In June 2022, negotiations were relaunched for a Free Trade Agreement, an Investment Protection Agreement, and an Agreement on Geographical Indications (GIs). Talks for the GI pact and a bilateral investment treaty are going on.

Highlights

The following are the highlights of the India-European Union free trade agreement.

• India, the 4th largest economy, and the European Union, the 2nd largest economy, comprising 25 per cent of Global GDP, account for one third of global trade.
• Over 99 per cent of Indian exports gain preferential entry into the EU, unlocking massive growth potential.
• Open new opportunities for MSMEs and create jobs for women, artisans, youth and professionals.
• $33 billion of exports in labour-intensive sectors like textiles, leather, marine products, gems and jewellery set to gain immensely from preferential access under the FTA.
• To bring down tariffs up to 10 per cent on almost $33 bn of exports to zero duty on the first day of the implementation of the pact.
• On automobiles, a calibrated and carefully crafted quota-based liberalisation package.
• Will not only allow EU auto makers to introduce their models in India in higher price bands but also open possibilities for Make in India and exports from India in future.
• Indian consumers to benefit from high-tech products and greater competition.
• The reciprocal market access in the EU will also open up opportunities for India-made automobiles.
• India has prudently safeguarded sensitive sectors, including dairy, cereals, poultry, soymeal, certain fruits and vegetables, balancing export growth with domestic priorities.
• FTA provides measures to tackle non-tariff barriers through strengthened regulatory cooperation, greater transparency, and streamlined customs, Sanitary and Phytosanitary (SPS) procedures, and Technical Barriers to Trade disciplines.
• Future-ready mobility framework expands global opportunities for skilled, semi-skilled Indian professionals.
• Through CBAM (carbon border adjustment mechanism) provisions, commitments have been secured, including a forward-looking most-favoured nation (MFN) assurance extending flexibilities.
• Certainty of market access, non-discriminatory treatment, focus on digitally delivered services, and ease of mobility will provide a boost to India’s services exports.
• India to get access to the EU’s 144 sub-sectors like IT/ITeS, Professional Services, and Education Services.
• The EU will get access to 102 sub-sectors offered by India.
• It will bring in high-tech services and investment into India from the EU, resulting in a mutually beneficial arrangement.
• FTA provides a facilitative and predictable framework for business mobility covering short-term, temporary and business travel in both directions.
• The EU and India are providing mobility commitments to each other for Intra-Corporate Transferees (ICT) and Business Visitors, along with entry and working rights for dependents and family members of ICTs.
• The EU has also offered commitments in 37 sectors/sub-sectors for Contractual Service Suppliers (CSS) and 17 sectors/sub-sectors for Independent Professionals (IP).
• India also secured a framework to constructively engage on Social Security Agreements over a five-year horizon.
• India secures access for practitioners of Indian Traditional Medicine to work under home title in EU nations where traditional medical practices are not regulated.
• FTA promotes cooperation to advance innovation and secure cross-border electronic payments.