A high-level summit in New Delhi today is set to achieve what nearly twenty years of negotiations could not. India and the European Union (EU) are expected to formally announce that talks on their ambitious free trade agreement (FTA) have been concluded, pushing the deal into its final phase before approval and implementation.
The importance of this moment lies in the sheer scale of the partnership. The EU is among India’s largest and most strategic trading partners, accounting for a sizeable share of both goods and services trade.
As global supply chains realign and geopolitical uncertainties grow, a comprehensive India-EU FTA could redefine economic engagement between the two regions—affecting everything from car prices and textile exports to professional mobility and investment flows.
In the fiscal year 2024-25, India’s goods trade with the EU stood at about USD 136.53 billion, with exports at USD 75.85 billion and imports at USD 60.68 billion, making the EU the largest goods market for India.
India also recorded a trade surplus of USD 15.17 billion with the EU in goods trade during the same period—highlighting the bloc’s importance as a destination for Indian exports.
On the services front, India-EU trade was valued at USD 83.10 billion in 2024, spanning key sectors such as telecommunications, information technology, engineering, and business services.
Overall, the EU accounts for nearly 17% of India’s total exports, underlining why improved access under the expected FTA could offer a major boost to Indian businesses across sectors.
Automobiles have emerged as one of the most closely watched components of the deal, largely because India’s car market has long been among the most protected globally.
Currently, duties on fully built European cars can range from 70% to 110%, depending on the model and price category. These steep levies have made European vehicles prohibitively expensive for most Indian buyers.
Under the FTA blueprint being negotiated, India has agreed to slash these tariffs to around 40% initially for a limited number of imported cars priced above roughly USD 17,700 (about Rs 16.3 lakh), according to sources familiar with the discussions.
Over time, these duties could be reduced further, potentially reaching around 10%, bringing India closer to prevailing global tariff norms.
This would mark the most significant opening of India’s auto sector to European manufacturers such as Volkswagen, Mercedes-Benz, BMW, Renault and Stellantis. As a result, premium and luxury models could become substantially more affordable for Indian consumers over the coming years.
Fully electric vehicles are expected to be excluded from these tariff cuts for at least the first five years. This safeguard is aimed at protecting domestic EV investments by Indian manufacturers such as Mahindra and Mahindra and Tata Motors, which are scaling up local EV production.
Indian textiles and apparel currently face duties of around 10% in the EU. These are expected to be phased down gradually under the FTA.
Lower tariffs would significantly improve India’s competitiveness against rivals such as Bangladesh and Vietnam in Europe’s massive apparel market, helping Indian exporters expand volumes and margins.
Electronics and machinery components imported from Europe are also likely to become more affordable once selected duties are eased. This is particularly important for Indian manufacturers that rely on specialised European inputs and currently face higher import costs.
Reports suggest that Indian exporters of machinery and electronics may also benefit from reduced technical barriers, simplifying entry into European markets. Over time, this could support India’s push to move up the manufacturing value chain.
Services already represent a robust pillar of India-EU economic ties, with trade touching USD 83.1 billion.
The FTA is expected to introduce clearer, more predictable rules for the movement of Indian professionals in sectors such as IT, engineering, and consulting.
Provisions under discussion include faster visa processing timelines and more transparent short-term entry norms. Even modest gains here could translate into higher services exports and expanded global opportunities for skilled Indian workers.
Agriculture remains one of the most politically sensitive areas in the India-EU FTA and is not expected to see broad tariff liberalisation.
Both sides have taken a cautious approach to avoid domestic backlash. EU officials have confirmed that dairy products and sugar are excluded, while the bloc has protected markets for beef, sugar and rice. India, in turn, has retained high tariffs on farm and dairy products to safeguard millions of small and marginal farmers.
As a result, consumers are unlikely to see major price changes for core agricultural products under the current framework.
That said, India’s food and beverage exports to the EU—valued at about USD 4.2 billion in 2024—are steadily growing. Products such as coffee, tea, spices, fish and fruits are expected to continue gaining ground even without broad farm liberalisation.
The EU’s “Carbon Border Adjustment Mechanism (CBAM)” is set to become a critical factor for Indian steel and aluminium exports.
During the transition phase, exporters will be required to report the carbon emissions embedded in each shipment. Once CBAM is fully enforced, a carbon-linked levy will apply.
India has been pushing for longer transition timelines and flexible reporting norms as part of the FTA discussions. Analysts estimate that full compliance could raise steel production costs by 3% to 8%, depending on emission intensity.
This burden is expected to be borne largely by exporting industries rather than domestic consumers, keeping local price impacts limited.
The proposed agreement spans 24 chapters, covering investment, intellectual property, mobility, and regulatory cooperation.
The EU has sought stronger investment protection provisions, including clearer dispute settlement mechanisms and predictable regulatory processes—aimed at creating a more stable business environment for companies on both sides.
Geographical indications remain a sensitive negotiation area. The EU has pushed for broader protection of its own GIs, including wines, cheeses and speciality food products.
India, meanwhile, has sought stronger recognition for its registered GIs such as Darjeeling tea, Basmati rice, Banarasi sarees and Kolhapuri chappals. Both sides have been negotiating the scope and enforcement of GI protections for years.
The chapter on skilled mobility is equally significant, as it directly supports India’s services exports and long-term investment flows. Together, these provisions aim to reduce legal uncertainty, cut operational friction, and encourage deeper economic integration.
The India-EU Free Trade Agreement represents a watershed moment in bilateral economic relations. By lowering tariffs on select goods such as cars, textiles and electronics, improving access for services, and offering greater regulatory and investment certainty, the deal has the potential to expand India’s export base by tens of billions of dollars over the next decade.
While sensitive areas like agriculture remain protected, the broader framework balances domestic interests with global competitiveness. For consumers, the most visible impact will likely be lower prices on select European products and better service availability. For businesses and professionals, the FTA opens doors to one of the world’s wealthiest and most stable markets—marking a significant step in India’s evolving trade strategy.