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India and the European Union are likely to announce the conclusion and finalization of free trade agreement talks on January 27.
News agency PTI quoted a government official as saying that the conclusion of FTA talks will be announced at the India-EU summit.
It took 18 years to reach the agreement. Negotiations began in 2007 and have seen two Prime Ministers, several Trade Commissioners and several abandoned visits.
Commerce and Industry Minister Piyush Goyal has called it the “mother of all deals”. European Commission President Ursula von der Leyen also echoed the sentiments at the recent Davos summit.
The timing of the India-EU trade deal is not coincidental as global trade is churning after US tariffs prompted the reshaping of supply chains, and Delhi and Brussels have opted to lock in predictability.
European Commission President Leyne, along with European Council President Antonio Costa, is in New Delhi on a four-day visit to attend Republic Day celebrations on January 26. He will meet Prime Minister Narendra Modi on January 27 for the summit.
Also read: European Commission President Ursula von der Leyen reached Delhi
The deal will not be signed immediately. The text will be legally scrutinized and ratification will make its way. For the EU, this also includes its Parliament. For India, the Union Cabinet. Therefore, implementation of the deal may take some time.
Why is the deal closing now?
Like most FTAs, the arithmetic lies in the duties. Import duties on more than 90% of traded goods will be reduced or eliminated. Labour-intensive sectors like textiles and footwear get the quickest relief – zero tariffs from day one. According to PTI, other products will have the duty removed in five, seven or ten years.
Quota-based access, as seen in India’s agreements with Australia and the UK, will be applicable for autos and alcoholic beverages. Sensitive agricultural products will remain out.
Liberalization is also being seen in services – telecommunications, accounting, transport, auditing – sectors where India already outsources to Europe, and Europe outsources to India.
This will be India’s eighth trade agreement since 2014, after Australia, UK, Oman, New Zealand, UAE, EFTA bloc and Mauritius. The older agreements—ASEAN, Japan, South Korea, Malaysia, SAFTA and Singapore—set the precedent. But the EU deal is the biggest yet: 27 developed economies including France, Germany, Italy, Spain and the Nordics.
The US has imposed huge tariffs of up to 50%, diverting trade and making diversification rational rather than ideological. India wants to provide relief to its exporters, reduce dependence on China and access the EU market which takes 17% of India’s shipments. EU sends 9% of its exports to India.
In 2024-25, India-EU goods trade stands at $136.53 billion – exports of $75.85 billion, imports of $60.68 billion – making the EU India’s largest trading partner. According to PTI, services are expected to grow by $83.10 billion in 2024.
With 450 million people, Europe’s GDP is $20 trillion. It exports $2.9 trillion and imports $2.6 trillion annually. India, with 1.4 billion people, exported goods worth $437 billion and services worth $387.5 billion; It imported goods worth $720 billion and services worth $195 billion.
Who benefits more in market access?
India wants zero-duty access for textiles, leather, handloom and processed foods. The EU wants auto, wine and high-tech access. As always, dairy has been excluded to protect small farmers. The EU, for its part, reserves beef, sugar and rice.
India’s FY25 exports to EU remained dependent on petroleum ($15B), electronics ($11.3B; smartphones $4.3B), textiles ($4.5B apparel + $1.6B textiles), machinery & computers ($5B), organic chemicals ($5.1B), iron & steel ($4.9B), gems & jewelery ($2.5B), pharma ($3B), auto parts ($1.6B), footwear ($809M), coffee ($775M). Imports were led by machinery and computers ($13b), electronics ($9.4b; mobile parts $3.7b; ICS $890.5m), aircraft ($6.3b), medical equipment and scientific instruments ($3.8b), gems and jewelery ($3b; rough diamonds $1.7b), organic chemicals ($2.3b), plastics ($2.3b).
Services follow a similar logic: India exports IT, telecom, transport and business services; It imports IP services, telecommunications and IT.
EU companies have invested $117.4 billion in India since 2000, accounting for 16.5% of total FDI, with a presence of 6,000 European companies. The total outflow of Indian FDI to the EU is $40.04 billion.