India and the European Union are nearing the conclusion of a long pending Free Trade Agreement that could reshape economic ties between the two sides at a time of growing global protectionism. After years of stalled negotiations, talks have accelerated amid rising trade barriers elsewhere, particularly in the United States, making the India EU deal strategically urgent for both partners.
Officials on both sides have indicated that negotiations are in an advanced stage, with the agreement expected to be finalised in 2026. India’s commerce ministry has described it as one of the most comprehensive trade pacts the country has ever negotiated, while European leaders see India as a key alternative market and manufacturing partner as they seek to reduce dependence on China.
The European Union is already India’s largest trading partner, with bilateral goods trade crossing USD 130 billion annually. The proposed FTA aims to significantly expand this figure by reducing tariffs, easing regulatory barriers and improving access to services and investment markets.
For India, the deal is expected to open up greater access for labour intensive exports such as textiles, garments, leather goods, pharmaceuticals and chemicals. India is also pushing for easier mobility for professionals, particularly in information technology, consulting and business services, along with clearer rules on digital trade.
The EU, on the other hand, is seeking steep tariff cuts on automobiles, machinery, wines and spirits, along with stronger intellectual property protection and regulatory alignment. European companies also want greater certainty on data flows and investment protection in the Indian market.
However, several sticking points remain. India has been cautious about lowering tariffs on cars and sensitive agricultural products, fearing pressure on domestic manufacturers and farmers. The EU’s Carbon Border Adjustment Mechanism, which effectively taxes carbon intensive imports, has emerged as another major concern for Indian exporters in sectors such as steel, aluminium and cement.
Differences over data protection rules, environmental standards and labour commitments have also slowed progress. While both sides have signalled flexibility, negotiators are still working to bridge gaps without triggering political backlash at home.
If concluded, the agreement is likely to produce clear winners and losers. Indian exporters in textiles, IT services and pharmaceuticals stand to gain from improved market access, while consumers could benefit from cheaper European imports. European automakers, machinery manufacturers and service providers are expected to gain a stronger foothold in India’s fast growing market.
At the same time, sections of India’s domestic automobile industry and smaller manufacturers could face stiffer competition and higher compliance costs. Concerns have also been raised about the impact of stricter intellectual property rules on India’s generic drug industry.
Despite these challenges, both New Delhi and Brussels see the deal as strategically necessary. With global trade becoming increasingly fragmented, the India EU FTA is being framed not just as a commercial agreement but as a geopolitical statement of deeper economic and strategic alignment.
As negotiations enter the final stretch, the coming months will determine whether both sides can strike a balance between ambition and domestic sensitivities to seal what could become one of the most consequential trade agreements of the decade.
