The proposed deal would lower tariffs on European cars and wine while opening up new markets for Indian electronics, textiles, and chemicals
India and the European Union are expected to announce the conclusion of long-running negotiations for a free trade agreement (FTA) on Tuesday, according to a Reuters report, citing two government sources from India and the EU.
The proposed deal would lower tariffs on European cars and wine while opening up new markets for Indian electronics, textiles, and chemicals.
The announcement could come following Prime Minister Narendra Modi’s meeting with European Council President Antonio Costa and European Commission President Ursula von der Leyen, who are set to co-chair the India-EU summit in India from January 25 to 28, Reuters quoted one Indian official as saying.
An EU official added that the bloc aims to “conclude negotiations on the free trade agreement” during the summit, after which both sides will follow internal procedures to formally sign the pact.
In addition to the FTA, India and the EU are expected to sign a security and defence agreement — Europe’s third in Asia after deals with South Korea and Japan — as well as a mobility agreement covering high-skilled workers and students, the official said.
Trade boost looms
If finalised and ratified by the European Parliament — a process that could take at least a year — the India-EU free trade agreement is expected to boost Indian exports such as textiles and jewellery, Indian official told Reuters.
Negotiations were relaunched in 2022 after a nine-year pause and gained momentum last year amid rising global trade tensions.
In August, former US President Donald Trump doubled tariffs on Indian imports to as much as 50%, among the highest globally, highlighting the growing need for alternative trade partnerships.
Speaking at the World Economic Forum in Davos on Tuesday, European Commission President Ursula von der Leyen said the EU was close to concluding the agreement but noted that additional work remains.
The potential pact follows recent EU agreements with the South American bloc Mercosur and other trade deals. India has also signed agreements with the UK, New Zealand, and Oman, reflecting a broader global effort to diversify trade partnerships and hedge against US tariff threats and geopolitical pressures.
Bilateral trade between India and the EU reached $136.5 billion in the 2024/25 fiscal year ending in March, making the 27-nation bloc one of India’s largest trading partners.
“Negotiators are still trying to bridge differences on several sensitive issues, including India’s reluctance to sharply cut tariffs on auto imports,” Reuters quoted an EU government source as saying.
Lowering car import taxes would allow automakers such as Volkswagen and Renault to expand in India by making imported models more competitive. While India is the world’s third-largest car market, high tariffs have limited growth for foreign automakers.
Non-tariff barriers
A key concern for New Delhi is a range of non-tariff barriers such as the newly introduced carbon levies on imports of goods including steel, aluminium and cement.
Duty-free access to the EU could help offset losses for Indian textile and jewellery exporters in the US, Ajay Srivastava, founder of the Delhi-based think tank Global Trade Research Initiative, said.
“An India–EU FTA would cut tariffs on textiles, garments and leather, letting Indian exporters compete more evenly with Bangladesh and Vietnam,” Reuters quoted Srivastava as saying.
The EU imports nearly $125 billion of textiles annually, where India holds a 5–6% share versus China’s 30%, highlighting the potential gains from an FTA amid rising US tariffs.
India’s autos, electronics, textiles, pharmaceuticals and chemicals are likely to emerge as key beneficiaries of a potential India–EU free trade agreement, according to Jefferies.
Some sensitive agricultural items have been excluded from negotiations, an Indian trade ministry official said earlier.
With inputs from agencies
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