Explainer: FTA with EU to help boost India’s exports to the 27-nation bloc

New Delhi: India and the European Union (EU) are in the final stages of negotiating a long-pending free trade agreement (FTA), which, once concluded, will become India’s 19th trade pact and is expected to significantly boost exports to the 27-nation bloc.

Since 2014, India has finalised seven trade agreements, including with Mauritius, Australia, the UAE, Oman, the UK, the European Free Trade Association (EFTA) and New Zealand. The proposed India-EU FTA assumes added importance amid disruptions in global trade flows due to high US tariffs, with Indian exports facing duties of up to 50 per cent. The agreement is expected to help Indian exporters diversify markets and reduce dependence on China.

Under an FTA, tariffs are reduced or eliminated, regulations are aligned and market access improves. The agreement is expected to benefit key sectors such as technology, pharmaceuticals, automobiles and textiles. Lower duties would make Indian exports from labour-intensive sectors—including garments, leather, pharmaceuticals, steel, petroleum products and electrical machinery—more competitive in the EU. Services exports such as telecommunications, business services and transport are also likely to see strong growth.

According to think tank GTRI, the European Union is expected to gain from higher exports of aircraft and parts, electrical machinery, diamonds and chemicals to India, along with growth in services such as intellectual property, IT, telecommunications and business services.

The FTA is expected to substantially boost bilateral trade. India’s goods trade with the EU stood at $136.53 billion in 2024–25, with exports of $75.85 billion and imports of $60.68 billion, making the bloc India’s largest trading partner for goods.

The EU accounts for about 17 per cent of India’s total exports, while India absorbs around 9 per cent of the EU’s overseas shipments.

In 2023–24, India exported $76 billion in goods and $30 billion in services to the EU, while EU exports to India totalled $61.5 billion in goods and $23 billion in services. Key EU destinations for Indian exports include Germany, Spain, Belgium, Poland and the Netherlands.

India’s major exports include petroleum products, electronics, textiles, machinery, chemicals, iron and steel, gems and jewellery, pharmaceuticals and auto components.

Textile exports currently face EU tariffs of 12–16 per cent, making them less competitive than those from countries such as Bangladesh and Vietnam, which enjoy preferential access.

Negotiations for the India-EU FTA began in 2007 but stalled in 2013 over differences on tariffs, intellectual property, labour standards and public procurement.

After renewed engagement post-2020, talks were formally relaunched in June 2022, covering an FTA, an investment protection agreement and a pact on geographical

indications.