Explained: What India stands to gain from a free trade agreement with the EU

India and the European Union (EU) are negotiating a free trade agreement (FTA), with talks now in the final stage. If concluded, the agreement would become India’s 19th trade deal and is expected to help expand the country’s exports to the 27-nation bloc.

Since 2014, India has finalised seven trade pacts — with Mauritius (implemented in April 2021), Australia (December 2022), the UAE (May 2022), Oman (signed in December 2025), the UK (signed in July 2025), the European Free Trade Association or EFTA (implemented in October 2025, covering Switzerland, Iceland, Liechtenstein and Norway), and New Zealand (talks concluded in December 2025).

Why the India–EU FTA matters

The proposed agreement comes at a time when global trade flows have been disrupted by the imposition of high tariffs by the United States. India is facing tariffs of up to 50 per cent, prompting exporters to look for alternative and stable markets.

The FTA with the EU is expected to help Indian exporters diversify shipments, reduce dependence on China, and improve market access in one of the world’s largest trading blocs.

Expected benefits for India and the EU

Under an FTA, tariffs or import duties are either reduced or eliminated. This is expected to open markets, align regulations between the two sides, and support key industries including technology, pharmaceuticals, automobiles and textiles.

Lower duties would make Indian exports more competitive in the EU, particularly from labour-intensive sectors such as garments, leather, pharmaceuticals, steel, petroleum products and electrical machinery. Indian services exports, including telecommunications, business services and transport, are also expected to grow.

According to think tank GTRI, the EU is likely to benefit from higher exports of aircraft and parts, electrical machinery, diamonds and chemicals to India. European service sectors such as intellectual property, business services, and IT and telecommunications may also see gains.

Bilateral trade snapshot

The FTA is expected to significantly boost two-way trade between India and the EU.

India’s bilateral trade in goods with the EU stood at USD 136.53 billion in 2024–25, with exports worth USD 75.85 billion and imports of USD 60.68 billion. This made the EU India’s largest trading partner for goods.

The EU accounts for around 17 per cent of India’s total exports, while the bloc’s exports to India make up about 9 per cent of its global shipments.

In 2023–24, India exported USD 76 billion worth of goods and USD 30 billion in services to the EU. During the same period, 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.

The EU, with a GDP of about USD 19.5 trillion and a population of over 450 million, exports roughly USD 2.9 trillion and imports more than USD 2.6 trillion annually. India, with a population of 1.4 billion, exported USD 437 billion in goods and USD 387.5 billion in services, while importing USD 720 billion worth of goods and USD 195 billion in services in 2024–25.

India’s exports and imports with the EU

India’s major exports include petroleum products such as diesel and ATF, electronics including smartphones, textiles, machinery and computers, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals and auto parts.

Currently, Indian textile exports to the EU face tariffs ranging from 12 to 16 per cent, making them less competitive than exports from countries such as Bangladesh and Vietnam, which enjoy preferential access under EU trade agreements, according to a GTRI report.

India’s main imports from the EU include machinery, computers including turbojets, electronics such as mobile phone parts and integrated circuits, aircraft, medical devices, scientific instruments, rough diamonds, organic chemicals, plastics, iron and steel, cars and auto parts.

Key services exports from India to the EU include business services, telecommunications and IT, and transportation services, while imports are dominated by intellectual property services and telecom and IT services.

Alcohol trade

Both India and the EU are significant players in the alcohol segment. India’s exports to the EU in 2023–24 included wines worth USD 1.5 million and spirits such as blended whisky, vodka, brandy and liqueurs valued at USD 64.9 million.

Imports from the EU included wines worth USD 412.4 million and spirits — including blended whisky, brandy, gin, tequila, vodka and liqueurs — valued at USD 22.3 million.

Foreign direct investment flows

India’s cumulative foreign direct investment (FDI) inflows from the EU between April 2000 and September 2024 stood at USD 117.4 billion. Around 6,000 EU companies operate in India, and FDI from the EU accounts for 16.6 per cent of India’s cumulative FDI equity inflows, which totalled USD 708.6 billion.

According to GTRI, India’s FDI outflows to the EU were valued at USD 40.04 billion between April 2000 and March 2024.

India receives the highest FDI from the Netherlands at USD 55 billion between April 2000 and September 2025, followed by Germany (USD 15.4 billion), France (USD 12 billion), Spain (USD 4.3 billion), Belgium (USD 4.1 billion), Italy (USD 3.65 billion), Sweden (USD 2.8 billion), Denmark (USD 1.44 billion) and Poland (USD 788.75 million).

A long road to negotiations

India–EU FTA negotiations began in 2007, with multiple rounds held between 2007 and 2013. Talks were slowed by differences over market access, intellectual property rights, labour standards and sustainable development.

By 2013, negotiations stalled over issues such as tariffs on automobiles, wine and spirits, data security for Indian IT firms, and public procurement.

While efforts to revive talks between 2016 and 2020 made limited progress, both sides renewed engagement after 2020. In June 2022, negotiations were formally re-launched for a Free Trade Agreement, an Investment Protection Agreement and an Agreement on Geographical Indications.

(With inputs from PTI)