India and EU Complete FTA Negotiations with Deal Announcement Set for Tuesday

India and the European Union have finalized official-level discussions for a proposed free trade agreement (FTA) aimed at enhancing bilateral trade and deepening economic cooperation, Commerce Secretary Rajesh Agrawal announced on Monday.

Agrawal stated that the negotiations are wrapping up, with both parties prepared to officially declare the successful conclusion of the FTA discussions on January 27, Tuesday.

Balanced Trade Agreement Focused on Growth

From India’s viewpoint, the trade agreement is balanced and geared toward future growth, facilitating closer economic integration with the EU. It is expected to stimulate trade and investment flows between the two regions.

The Commerce Secretary confirmed that the negotiations have been successfully concluded and the deal finalized. Currently, the legal review of the FTA text is underway, with efforts focused on completing all formalities promptly to enable early signing of the agreement.

The pact is anticipated to be signed within the year and potentially take effect early next year. While India requires only the Union Cabinet’s approval, the EU must secure endorsement from the European Parliament before implementation.

Background and Official Announcement

This agreement concludes 18 years of talks that began in 2007. Commerce and Industry Minister Piyush Goyal described the FTA as the most significant trade deal India has finalized to date.

The formal announcement of the agreement’s completion will occur during the India-EU summit in New Delhi on Tuesday. European Commission President Ursula von der Leyen and European Council President Antonio Costa will meet Prime Minister Narendra Modi.

Trade Benefits and Tariff Reductions

The pact is projected to grant duty-free access to various Indian products, particularly from labor-intensive sectors such as textiles, chemicals, gems and jewelry, electrical machinery, leather, and footwear.

Currently, the EU applies an average tariff of 3.8% on Indian goods, with labor-intensive items subject to approximately 10% import duties. India’s average tariff on EU goods stands at 9.3%, with higher rates on automobiles and parts (35.5%), plastics (10.4%), and chemicals and pharmaceuticals (9.9%).

An FTA typically involves reducing or eliminating tariffs on over 90% of traded goods and easing regulations to foster trade in services like telecommunications, transportation, accounting, and auditing.

Recent Indian FTAs and Strategic Importance

Since 2014, the Indian government has finalized FTAs with Australia, the UK, Oman, New Zealand, the UAE, the EFTA bloc, and Mauritius.

The agreement holds strategic importance due to recent global trade disruptions from high tariffs imposed by the United States, notably a 50% tariff burden on India. The FTA aims to help Indian exporters diversify markets and reduce dependence on China.

Alongside the FTA, India and the EU are negotiating agreements on investment protection and Geographical Indications. The India-EU FTA will encompass 24 chapters addressing trade in goods, services, and investment.

Bilateral Trade Statistics and Economic Impact

In the fiscal year 2024-25, India’s bilateral trade in goods with the EU reached $136.53 billion, with exports totaling $75.85 billion and imports $60.68 billion, establishing the EU as India’s largest goods trading partner.

Services trade amounted to $83.10 billion in 2024. India maintained a trade surplus of $15.17 billion during this period.

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

With a GDP near $20 trillion and a population exceeding 450 million, the EU is a major global trade force, exporting around $2.9 trillion and importing about $2.6 trillion annually.

India, home to 1.4 billion people, exported $437 billion in goods and $387.5 billion in services in 2024-25, while importing goods valued at $720 billion and services at $195 billion.

Top Goods and Services Trade Between India and the EU

India’s top goods exports to the EU in FY2025 included:

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

Key imports from the EU featured:

  • Machinery and computers ($13 billion)
  • Electronics such as mobile phone parts ($3.7 billion) and integrated circuits ($890.5 million)
  • Aircraft ($6.3 billion)
  • Medical devices and scientific instruments ($3.8 billion)
  • Gems and jewelry including rough diamonds ($3 billion and $1.7 billion respectively)
  • Organic chemicals ($2.3 billion)
  • Plastics ($2.3 billion)

India’s principal services exports to the EU comprise other business services, telecommunications and IT, and transportation. Services imports from the EU include intellectual property services and telecommunications and IT.

Key Takeaways

  • India and the EU have completed official negotiations on a balanced FTA aimed at boosting trade and economic integration.
  • The agreement is expected to be signed within 2026, following legal reviews and required approvals.
  • The FTA covers tariff reductions on goods and services, benefiting labor-intensive sectors and strategic industries.
  • The deal marks the end of 18 years of negotiations and is India’s most significant trade agreement to date.
  • Bilateral trade between India and the EU is substantial, with the EU serving as India’s largest goods trading partner.