India, Jan 19 : After nearly two decades of negotiations, India and the European Union are on the verge of finalizing a comprehensive free trade agreement (FTA), officials and trade analysts say. A formal announcement is expected around the 16th India–EU Summit on January 27, coinciding with India’s 77th Republic Day celebrations in New Delhi.
According to the Global Trade Research Initiative (GTRI), if concluded, the pact would be India’s largest and most complex trade agreement, covering goods, services, and trade rules across the EU’s 27-member bloc. While the deal promises significant economic gains for both sides, unresolved issues could determine whether it becomes a growth catalyst or an uneven bargain.
From Stalemate to Sprint: The Negotiation Journey
Negotiations began in 2007 under a Broad-based Trade and Investment Agreement (BTIA) but stalled repeatedly over contentious areas such as automobiles, wine and spirits, data rules, public procurement, intellectual property, and labor standards. Talks froze after 2013.
The revival came in 2022, driven by global trade disruptions, rising protectionism, and Europe’s push to diversify supply chains away from China. Both sides narrowed ambitions, parked politically sensitive sectors like agriculture, and refocused on an “executable” agreement. Investment protection and geographical indications are now being negotiated separately.
Part of India’s Accelerated FTA Strategy
The EU deal would mark India’s ninth trade agreement in four years, reflecting New Delhi’s accelerated push for FTAs. Since 2021, India has signed pacts with the UAE, Australia, New Zealand, the UK, and EFTA, while engaging in plurilateral frameworks like the Indo-Pacific Economic Framework.
For India, the EU market is particularly important, with 450 million consumers and an economy valued at €18–22 trillion. Indian exporters also lost competitiveness after the EU withdrew Generalised System of Preferences (GSP) benefits in 2023.
Potential Gains for India and the EU
India: Lower tariffs on labour intensive goods like textiles, garments, leather, and footwear could directly benefit employment-heavy industries. Enhanced access for IT and other skill intensive services could reduce dependence on the US market and leverage India’s large workforce.
EU: Reduced tariffs on automobiles, machinery, chemicals, and aircraft would boost exports, while access to India’s services, investment, and procurement sectors would strengthen Europe’s economic footprint and supply chain diversification.
Key Negotiation Challenges
Goods trade remains sensitive: the EU seeks tariff elimination on over 95% of its exports, while India plans to liberalize around 90%, with agriculture and dairy excluded. Automobiles, wine, and spirits are contentious, with compromises emerging around quota-based car imports and phased reductions on alcohol.
Services negotiations remain complex. India seeks data security recognition, professional mobility, short-term visas, and social security agreements, while the EU wants greater access to financial and legal services and tighter alignment on regulatory and data standards.
Other flashpoints include government procurement, sustainability commitments, and intellectual property rights, with India cautious about binding obligations and TRIPS plus demands.
Two Red Flags for India
Carbon Border Adjustment Mechanism (CBAM): Climate-linked import charges on metals like steel and aluminium could undermine export competitiveness, especially for MSMEs. India is seeking exemptions or safeguards.
Non-Tariff Barriers: Complex certification regimes, regulatory delays, and stringent product standards could limit gains from tariff liberalization unless mutual recognition and regulatory cooperation are implemented.
The Road Ahead
Bilateral trade already exceeds $190 billion, with the EU accounting for 16.6% of cumulative FDI into India since 2000. A successful FTA could anchor the relationship amid global uncertainty, but its impact will depend on how remaining issues including CBAM, services mobility, and regulatory asymmetries are resolved.