Explainer: FTA will help India boost exports to 27-nation bloc

New Delhi: India and the European Union (EU) on Tuesday announced the conclusion and finalisation of negotiations for the proposed free trade agreement (FTA).

This will be the 19th trade deal for India. The FTA will help boost the country’s exports to the 27-nation bloc.

Since 2014, India has finalised seven trade pacts -- Mauritius (April 2021 implemented), Australia (December 2022 implemented), UAE (May 2022 implemented), Oman (signed in December 2025), UK (signed in July 2025), EFTA (implemented in October 2025 - Switzerland, Iceland, Liechtenstein, Norway), and New Zealand (talks concluded in December 2025).

IMPORTANCE OF THIS FTA:

The imposition of high tariffs by the US has disrupted the global flow of goods. India is facing steep 50 per cent tariffs. The FTA is expected to help Indian exporters diversify their shipments. It will also help reduce dependence on China. The EU is also facing a threat of high US tariffs.

BENEFITS FOR INDIA AND THE EU:

Tariffs or import duties are either reduced or eliminated under an FTA. Therefore, an FTA will open markets, align regulatory frameworks, and benefit key industries such as technology, pharmaceuticals, automobiles, and textiles.

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

According to think tank GTRI, the EU will 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:

India’s bilateral trade in goods with the EU was $136.53 billion in 2024-25 (exports worth $75.85 billion and imports worth $60.68 billion), making the EU India’s largest goods trading partner.

The EU market accounts for about 17 per cent of India’s total exports, and the bloc’s exports to India constitute 9 per cent of its total overseas shipments.

In 2023-24, India exported $76 billion in goods and $30 billion in services to the EU, while the EU exported $61.5 billion in goods and $23 billion in services to India. Within the EU, Spain, Germany, Belgium, Poland and the Netherlands are key destinations for Indian exporters.

INDIA’S EXPORTS AND IMPORTS:

Major exports are petroleum products (Diesel and ATF), electronics (including smartphones), textiles, machinery and computers, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals, and auto parts.

Currently, India’s textile exports to the EU face tariffs of 12-16 per cent, making Indian products less competitive than those from countries like Bangladesh and Vietnam, which enjoy preferential market access under EU trade agreements, a GTRI report said.

Main imports are Machinery, computers (including turbojets), electronics (including mobile phone parts and integrated circuits), aircraft, medical devices, scientific instruments, rough diamonds, organic chemicals, plastics, iron and steel, cars, and auto parts.

India’s key services exports to the EU are business services, telecommunications and IT, and transportation services, while imports are intellectual property services and telecommunications and IT.

ALCOHOL TRADE:

Both regions are key players in this segment. India’s exports to the EU in 2023-24 included wines ($1.5 million), blended whiskeys, vodka, brandy, and liqueurs ($64.9 million). Imports included wines ($412.4 million), blended whiskeys, brandy, gin, tequila, vodka, and liqueurs ($22.3 million).

FDI INFLOWS:

India’s cumulative FDI inflows from the EU from April 2000 to September 2024 totalled $117.4 billion, with about 6,000 EU firms operating in India. FDI from the EU accounted for 16.6 per cent of the cumulative FDI equity inflows from all countries, which stood at $708.6 billion.

According to GTRI, India’s FDI outflows to the EU totalled about $40.04 billion from April 2000 to March 2024.

India mainly receives FDI from the Netherland ($55 billion) during April 2000 and September 2025), Germany ($15.4 billion), France ($12 billion), Spain (4.3 billion), Belgium ($4.1 billion), Italy (3.65 billion), Sweden ($2.8 billion), Denmark ($1.44 billion), and Poland ($788.75 million).

LONG NEGOTIATIONS:

The India-EU FTA negotiations began in 2007. Initially, from 2007 to 2013, multiple rounds of negotiations took place but were hindered by disagreements over market access, intellectual property rights, labour standards, and sustainable development.