The free trade agreement (FTA) between India and the European Union (EU) will help boost the country's exports to the 27-nation bloc. It is expected to help Indian exporters diversify their shipments, besides reducing dependence on China and USA. Like India, the EU is also facing a threat of high US tariffs, and this FTA is aimed at countering its fallout.
Takeaways for India, EU
The reduction and elimination of tariffs or import duties under the FTA will open markets, align regulatory frameworks and benefit key industries like technology, pharmaceuticals, automobiles and textiles.
Lower or zero import duties will make Indian exports, including from labour-intensive sectors like garments, leather, pharmaceuticals, steel, petroleum products and electrical machinery, more competitive in the EU.
Similarly, Indian services exports, including telecommunications, business services, and transport, are also expected to grow significantly. According to think tank GTRI, the EU will benefit from higher exports of aircraft and parts, electrical machinery, diamonds and chemicals to India. European service sectors like intellectual property, business services and IT and telecommunications may also see gains.
Huge trade potential
India's bilateral trade in goods with the EU was USD 136.53 billion in 2024-25 (exports worth USD 75.85 billion and imports worth USD 60.68 billion), making the EU India's largest goods trading partner. The EU market accounts for about 17 per cent of India's total exports, and the bloc's exports to India constitute 9 per cent of its total overseas shipments.
In 2023-24, India exported USD 76 billion in goods and USD 30 billion in services to the EU, while the EU exported USD 61.5 billion in goods and USD 23 billion in services to India. Within the EU, Spain, Germany, Belgium, Poland and the Netherlands are key destinations for Indian exporters.
Balancing exports, imports
Major Indian exports are petroleum products (diesel and ATF), electronics (including smartphones), textiles, machinery and computers, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals and auto parts.
Currently, India's textile exports to the EU face tariffs of 12-16 per cent, making Indian products less competitive than those from countries like Bangladesh and Vietnam, which enjoy preferential market access under EU trade agreements, a GTRI report said.
Main imports are machinery, computers (including turbojets), electronics (including mobile phone parts and integrated circuits), aircraft, medical devices, scientific instruments, rough diamonds, organic chemicals, plastics, iron and steel, cars and auto parts. India's key services exports to the EU are business services, telecommunications and IT, and transportation services, while imports are intellectual property services and telecommunications and IT.
Both regions are key players in this segment. India's exports to the EU in 2023-24 included wines (USD 1.5 million), blended whiskeys, vodka, brandy, and liqueurs (USD 64.9 million). Imports included wines (USD 412.4 million), blended whiskeys, brandy, gin, tequila, vodka and liqueurs (USD 22.3 million).
FDI inflows
India's cumulative FDI inflows from the EU from April 2000 to September 2024 totalled USD 117.4 billion with about 6,000 EU firms operating in India. FDI from the EU accounted for 16.6 per cent of the cumulative FDI equity inflows from all countries, which stood at USD 708.6 billion. According to GTRI, India's FDI outflows to the EU totalled about USD 40.04 billion from April 2000 to March 2024.
Deal sealed after 18 years
The India-EU FTA negotiations began in 2007. Initially, from 2007 to 2013, multiple rounds of negotiations took place, but were hindered by disagreements over market access, intellectual property rights, labour standards and sustainable development.
By 2013, the talks hit a standstill, particularly due to differences over tariffs on automobiles, wine, spirits, data security for Indian IT firms and public procurement. Despite efforts to revive negotiations between 2016 and 2020, substantial progress remained elusive. However, after 2020, both India and the EU showed renewed interest in resuming talks.
In June 2022, negotiations were relaunched for a free trade agreement, an investment protection agreement, and an agreement on geographical indications (GIs). Talks for the GI pact and a bilateral investment treaty are going on.
Also read: India-EU ink free trade agreement, 'mother of all deals'
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