India–EU trade pact close to finish line as US negotiations drag on

India expects talks on a long-pending trade agreement with the European Union to conclude this month, Trade Secretary Rajesh Agrawal said on Thursday, as New Delhi looks to secure new markets while negotiations with the United States continue to drag on amid tariff pressures.

If finalised, the pact would be India’s largest trade agreement and mark a major step in deepening economic ties with the 27-nation EU. Bilateral trade between India and the bloc totalled 120 billion euros ($140 billion) in 2024, making the EU India’s biggest trading partner.

Agrawal said India and the EU were “very close” to concluding the deal and were exploring whether it could be wrapped up before senior leaders meet in New Delhi later this month.

He said discussions on a separate trade agreement with the United States were continuing, adding that a deal would be reached when both sides were ready. Negotiations with Washington collapsed last year following a breakdown in communication between the two governments.

The President of the European Council, Antonio Costa, and European Commission President Ursula von der Leyen, will visit India from January 25 to 27 and co-chair an India–EU summit on January 27, India’s foreign ministry said.

The European Commission, which negotiates on behalf of the EU’s member states, also expressed cautious optimism during remarks to EU envoys late on Wednesday, according to sources familiar with the discussion.

However, key sticking points remain, particularly over cars and steel, the sources said. The EU wants India to sharply cut import duties on European cars, which can exceed 100 per cent, while India is concerned its steel exports could be constrained by the EU’s carbon border levy and safeguard measures that limit overall steel imports.

If concluded, the agreement would open India’s large and heavily protected consumer market of more than 1.4 billion people to European goods and could reshape trade flows at a time when protectionism is rising globally and a US–India deal remains stalled.

Both sides have been pushing to finalise a broad agreement after von der Leyen and Indian Prime Minister Narendra Modi agreed to fast-track negotiations, with the aim of closing a deal in 2025. Talks, which were relaunched in 2022, gained momentum after US President Donald Trump imposed tariff hikes on trading partners, including India.

Brussels has recently concluded trade agreements with Mexico and Indonesia and has stepped up talks with India. New Delhi, meanwhile, has reached trade deals with Britain, Oman and New Zealand. Some officials in Brussels view the India deal as welcome, though less ambitious than other EU free trade agreements in terms of scope and tariff reductions.

Agriculture off the table

Some sensitive agricultural items have been excluded from the negotiations, an Indian trade ministry official said.

Indian officials have repeatedly said the country will not open its agriculture or dairy sectors in any trade pact, citing the need to protect millions of subsistence farmers.

The EU is pressing for steep tariff cuts on cars, medical devices, wine, spirits and meat, along with stronger intellectual property protections. India is seeking duty-free access for labour-intensive goods and faster recognition for its automobile and electronics sectors.

Beyond goods, the agreement is expected to expand cooperation in services, investment, digital trade, intellectual property and green technologies, and could boost European investment in Indian manufacturing, renewable energy and infrastructure.

Challenges remain over regulatory alignment and the protection of sensitive sectors. The EU has also insisted that trade partners adhere to international labour and environmental standards, with commitments to the Paris climate change agreement still under discussion.

(With inputs from Reuters)