Friday, 12 Sep, 2025
This would be one of the most significant FTAs for India as EU is its second largest trading partner after the US
In a significant move, India and EU formally re-launched the India-EU Free Trade Agreement (FTA) negotiations. This was announced last week by Union Commerce and Industries minister Piyush Goyal and Valdis Dombrovskis, Executive Vice-President of European Commission at a joint event held at Brussels. This is after a gap of about nine years since the earlier negotiations were left off in 2013 due to a difference in the scope and expectations from the deal.
Last month an agreement was reached for restarting negotiations. The process gained traction with the Delhi visit of the European Commission President Ursula von der Leyen in April 2022 and Prime Minister Narendra Modi’s recent visit to Europe, and helped in defining a clear roadmap for the negotiations.
This would be one of the most significant FTAs for India as EU is its second largest trading partner after the US. The India-EU merchandise trade has registered an all-time high value of USD 116.36 Billion in 2021-22 with a year-on growth of 43.5%. India’s export to the EU jumped 57% in FY 2021-22 to $65 billion. India has a surplus trade with EU.
In the last decade trade in goods between the EU and India increased by about 30 percent making India EU’s 10th largest trading partner, accounting for 2.1% of EU total trade in goods in 2021, well behind China (16.2%), the USA (14.7%) or the UK (10%). This relatively small share of overall EU trade in goods points to a large untapped potential. The EU is the second-largest destination for Indian exports (14.9% of the total) after the USA (18.1%), while China only ranks fourth (5.8%).
Areas of concern
For Europe, the economic rationale for the FTA is access for EU firms to a market of over a billion people, which could be a means to escape long-term economic malaise. During the talks the EU will likely push for lower tariffs to gain greater access to Indian markets for its cars, alcoholic drinks and agri-food products such as cheese. This may hurt the domestic companies and the “Make in India” campaign. It was on this issue that Brussels and New Delhi went into snooze mode back in 2013 with Europe frustratedly lambasting India for protectionism.
India wants greater market access in financial services and mobility for professionals. It may face tough resistance during negotiations and be a stumbling block.
India has already signed two important free trade agreements this year – with the United Arab Emirates (UAE) and Australia – and is negotiating a comprehensive trade deal with the United Kingdom, the breakaway partner of the EU.
