EU-India FTA: Benefits, Significance and the Way Forward

• Commentary Geoeconomics
  by Amitendu Palit
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The European Union (EU) and India had begun negotiating a bilateral trade deal way back in 2007. They eventually concluded the negotiations at the EU-India Summit held in Delhi on 27 January 2026. The President of the European Commission Ursula von Der Leyen described the deal as the 'mother of all deals' and emphasized it marking the beginning of a strategic relationship between Europe and India that will grow stronger over time. The Indian Prime Minister Narendra Modi called it 'historic' and 'India's largest Free Trade Agreement'.

The History

As mentioned, the deal took almost two decades to be finalized. The reason for the long delay was primarily the stalling of negotiations in 2013. Negotiations commenced again from 2022. The negotiating context for both the EU and India changed significantly during 2016-2022. Several factors contributed to the change. Foremost among these were Britain's separation from the EU through Brexit; Donald Trump's election as the US President; outbreak of the COVID-19 pandemic; and intensification of the US-China major power rivalry. A systemic crisis within the WTO impacting its efficiency, rapid onset of digitalization, and deepening of the effects of global climate change were the other noteworthy factors impacting the context of the EU-India FTA talks.

After negotiations recommenced, talks were fast-tracked with the objective of concluding them by the end of 2023. This was clearly an ambitious target and could not be met. The pace of negotiations significantly accelerated after President Von Der Leyen and the EU College of Commissioners visit to India in February 2025. Leaders from both sides committed to concluding the FTA during the course of the year. The strong political commitment to the conclusion of the FTA coupled with the urgency demonstrated by trade negotiators on both sides has led to its eventual conclusion.

Economic Security

The economic significance of the deal needs to be looked at not just from the expected increase in bilateral trade, but the economic security it provides to both the EU and India. The Leaders Statement issued during von Der Leyen's visit to India in February 2025 had alluded to a variety of issues that the India-EU Trade and Technology Council will focus on, including economic security. The FTA has focused on enhancing economic security for both sides through a series of complementing decisions. These include respecting mutual red lines on safeguarding sensitive agricultural sectors for both sides. For the EU, sugar, rice, wheat, beef and poultry remain protected by tariffs, as they do for dairy, cereals and poultry for India.

Keeping sensitive agricultural sectors tariff-protected might appear to be a safe and low-ambition strategy adopted by both sides. Neither side, however, were willing to risk economic securities of farmers at a time when their agricultural exports to the US are facing higher exports. Any efforts to lower tariffs in these sectors would have also stirred strong political unrest, given the agitations expressed on EU's FTA with the Mercosur and India's trade deal with the US.

Market Access Gains

In other areas of market access, both sides have obtained concessions for their key sectors. For India, labour-intensive export sectors, such as textiles, apparels, marine products, leather products, and gems & jewellery, will gain immediate zero-tariff access to the EU market upon the implementation of the deal. For the EU, the key sectors gaining deep market access in India will be automobiles, auto components, wine, spirits, beer, processed foods, machinery and cosmetics. For some of the sectors on both sides, the tariff reduction will be gradual, ostensibly to make sure that domestic producers of the same items get enough time for adjusting to the competition from imports.

There's much that both sides will look forward to gaining from bilateral trade in services. Bilateral trade in services is currently at around 60 billion euros (71 billion dollars), roughly half of the bilateral trade of 120 billion euros (142 billion dollars) in goods. This trade is expected to significantly enlarge in various services, especially in IT, professional, education, telecom, maritime, financial and environmental services. Overall services trade is also expected to further expand from provisions in digital trade. The consequential ones among these include rules for protecting software source code, online consumer functions and harms caused by spams. A separate mobility agreement to be worked out by both sides for facilitating temporary movement of skilled professionals should also enable greater services trades.

Strategic Significance

A FTA between EU and India creates a combined market of around 25 trillion dollars comprising 2 billion people. These translate to roughly a quarter each of the world economy and the global population leaving little doubt about the enormous scale of the deal. The free trade area created by the deal will generate significant economic activity as it takes shape. Beyond economics, the deal serves a powerful message to the world on the confidence of two of the world's largest strategic actors in each other and in rules-based trade. The messaging also confirms the ability of the Global North and the Global South to work together on common rules for trade.

The Way Forward

Moving forward, a few issues remain to be addressed. These include the preparation of the legal text and its ratification by the Indian and European Parliaments. Preparing the legal text, or legal scrubbing, is the key to a successful FTA by making it user-friendly for businesses on both sides. While this will take some months, more time might be needed for legislative ratifications of the deal at both ends. It is important for trade negotiators and the political leaderships to make sure that the momentum and purposeful energy on view in concluding the deal is maintained in its final drafting and implementation.

There are some issues where the FTA has been narrower in scope than expected. It doesn't, till now, include chapters on government procurement and investment. The exclusion of the government procurement chapter is surprising, especially since India's FTA with the UK concluded last year has mutual commitments on government procurement. Omission of the investment chapter can be explained by both countries working on a bilateral investment agreement. Speedy progress on the investment agreement is important for energizing trade-linked investments on both sides.

There is also no mention of how the contentious issue of Carbon Border Adjustment Mechanism (CBAM) will be addressed. No mention of CBAM suggests CBAM-sensitive exports from India will continue to be taxed at the EU borders. Similarly, there is also no clear indication of whether India's domestic data protection laws align with the EU GDPR and whether India might be treated as a secure data territory. Both the CBAM and data security issues need to be addressed for maximizing benefits of the FTA.

At this stage, however, the conclusion of the FTA needs to be celebrated as an achievement and for proving cynics wrong. It should be celebrated for the determined political will and negotiating rigour that has gone into its making.