India and EU Successfully Finalize Free Trade Agreement Negotiations, Says Commerce Secretary

New Delhi, January 26 (PTI) – India and the European Union (EU) have successfully completed negotiations for a proposed free trade agreement (FTA), aimed at enhancing bilateral trade and reinforcing economic relations, Commerce Secretary Rajesh Agrawal announced on Monday.

Agrawal stated that official-level negotiations are concluding, and both parties are prepared to officially declare the successful completion of the FTA talks on Tuesday, January 27.

Details of the Free Trade Agreement

From India’s perspective, the agreement is balanced and forward-thinking, expected to facilitate closer economic integration between India and the EU. It is anticipated to promote increased trade and investment activities in both economies.

“The negotiations have been successfully finalized,” Agrawal confirmed. He added that the legal review of the FTA document is currently in progress with the aim of completing formalities and signing the agreement promptly.

The pact is expected to be signed within the year and could come into effect early next year. Its implementation requires approval from the European Parliament, whereas in India, only the Union Cabinet’s consent is needed.

This agreement marks the end of 18 years of negotiations, which began in 2007. Commerce and Industry Minister Piyush Goyal described the FTA as “the mother of all deals” India has signed to date.

Upcoming Announcement and Summit

The formal announcement of the conclusion of the talks will take place during the India-EU Summit in New Delhi on Tuesday. European Commission President Ursula von der Leyen and European Council President Antonio Costa will engage in summit discussions with Prime Minister Narendra Modi on January 27.

Expected Benefits and Market Impact

The agreement is expected to grant duty-free access to many Indian products, especially from labor-intensive sectors like textiles, chemicals, gems and jewelry, electrical machinery, leather, and footwear.

Currently, the EU applies an average tariff of about 3.8% on Indian goods; however, for labor-intensive sectors, tariffs are approximately 10%. Conversely, India imposes an average tariff of about 9.3% on EU products, with higher rates on automobiles and parts (35.5%), plastics (10.4%), and chemicals and pharmaceuticals (9.9%).

Typically, an FTA reduces or eliminates import duties on over 90% of goods traded between the parties and also relaxes regulations to encourage trade in service sectors such as telecommunications, transportation, accounting, and auditing.

Since 2014, the NDA government has finalized seven trade agreements with Australia, the United Kingdom, Oman, New Zealand, the United Arab Emirates, the European Free Trade Association (EFTA) bloc, and Mauritius.

This FTA holds particular importance amid disruptions in global trade caused by the United States imposing high tariffs, including a 50% tariff burden on India. The agreement is expected to aid Indian exporters in diversifying their markets and reduce reliance on China.

Additional Negotiations and Agreement Scope

Besides the FTA, India and the EU are also negotiating agreements on investment protection and Geographical Indications. The India-EU FTA encompasses 24 chapters, covering trade in goods, services, and investments.

Trade Data and Economic Context

India’s bilateral merchandise trade with the EU stood at USD 136.53 billion in 2024-25, with exports valued at USD 75.85 billion and imports at USD 60.68 billion, making the EU India’s largest partner in goods trade. Trade in services with the EU amounted to USD 83.10 billion in 2024.

India recorded a trade surplus of USD 15.17 billion in 2024-25.

The EU accounts for about 17% of India’s total exports, while exports from the EU to India represent 9% of the bloc’s total overseas shipments.

The EU has a GDP of approximately USD 20 trillion and a population exceeding 450 million, making it a major global trading entity, with annual exports of around USD 2.9 trillion and imports over USD 2.6 trillion.

India, with a population of 1.4 billion, exported goods worth USD 437 billion and services worth USD 387.5 billion, while importing goods valued at USD 720 billion and services at USD 195 billion in 2024-25.

Major Export and Import Categories

Key Indian exports to the EU in fiscal year 2025 included:

Petroleum products (USD 15 billion)
Electronics (USD 11.3 billion, including smartphones at USD 4.3 billion)
Textiles (USD 1.6 billion, with garments at USD 4.5 billion)
Machinery and computers (USD 5 billion)
Organic chemicals (USD 5.1 billion)
Iron and steel (USD 4.9 billion)
Gems and jewelry (USD 2.5 billion)
Pharmaceuticals (USD 3 billion)
Auto parts (USD 1.6 billion)
Footwear (USD 809 million)
Coffee (USD 775 million)

Major imports from the EU included:

Machinery and computers (USD 13 billion)
Electronics (USD 9.4 billion, including mobile phone parts at USD 3.7 billion and integrated circuits at USD 890.5 million)
Aircraft (USD 6.3 billion)
Medical devices and scientific instruments (USD 3.8 billion)
Gems and jewelry (USD 3 billion, with rough diamonds at USD 1.7 billion)
Organic chemicals (USD 2.3 billion)
Plastics (USD 2.3 billion)

Services Trade Overview

India’s principal services exports to the EU comprised other business services, telecommunications and IT, and transportation. Services imports from the EU included intellectual property services as well as telecommunications and IT.

Key Takeaways

India and the EU have finalized 18 years of FTA negotiations, expected to boost bilateral trade and investment.
The agreement aims to provide duty-free access for many Indian products and ease tariffs on both sides.
Implementation requires European Parliament approval and India’s Union Cabinet consent.
The FTA covers goods, services, and investments, expected to enhance economic integration.
India-EU trade shows significant bilateral volume, with the EU as India’s largest goods trade partner.
The deal is timely amid global trade disruptions and aims to diversify India’s export markets.