India and the European Union (EU) are on the cusp of concluding a landmark Free Trade Agreement (FTA), which both the countries have termed as mother of all trade deals. The deal, which is likely to be concluded on 27 January, is estimated to boost India’s exports to the region by over 50% in next five years.
According to an Emkay Global Financial Services report, the deal could increase India’s exports to the bloc by up to $50 billion by 2031.
The deal, under negotiation for years, is now seen as a crucial strategic buffer against global trade fragmentation and rising protectionism.
On Sunday, India’s commerce minister Piyush Goyal said the EU remains a vital economic & strategic partner for India, and “we value our shared commitment to a mutually beneficial, ambitious India-EU FTA for the prosperity of our businesses and people” as he welcomed Maroš Šefčovič, European Commissioner for Trade and Economic Security, in India.
The push for a deal is strengthened by the highly complementary nature of the two economies' trade. A report by the Global Trade Research Initiative (GTRI) notes that India-EU goods trade crossed $136 billion in FY2025, "built on complementary value chains rather than direct competition."
"India exports labour-intensive, downstream products, while the EU supplies capital goods, technology and industrial inputs—making tariff cuts mutually beneficial," the GTRI report stated. This structure means tariff elimination under an FTA would "lower input costs, deepen value chains and expand trade—classic FTA economics that supports industry on both sides."
The current trade landscape
India has trade surplus with the EU, which stood at nearly $15 billion in FY2025, with exports of $75.9 billion against imports of $60.7 billion. The EU accounts for about 17% of India's total goods exports and one-third of its IT services exports.
According to Emkay Global Financial Services, India's export basket to the EU has evolved from traditional goods like textiles and gems to more medium-tech products. "India's export basket with the EU too has moved up the value chain with time, with high-value exports (electronics, machinery, chemicals) gaining share over traditional labour-intensive goods," the Emkay report observed.
Sectoral winners and sticking points
Key Indian sectors poised to benefit include textiles, pharmaceuticals, and chemicals. The EU is a top destination for Indian textiles, absorbing 35-38% of exports. However, India faces tariffs of 10-12%, while competitors like Bangladesh and Vietnam enjoy duty-free access via their own FTAs. "If tariff drops from 10–12% to 0%, then India will have a massive boost in price competitiveness," the Emkay report noted.
The EU is India's second-largest pharma export market. Non-tariff barriers like lengthy approval processes are a bigger hurdle than tariffs. The FTA is expected to focus on regulatory cooperation such as accelerated marketing approvals, which would significantly help Indian generic drug manufacturers.
India is a net exporter of chemicals to the EU. Emkay analysts believe the FTA could "increase the overall export volumes to the EU, providing better scope for competition vs Chinese pricing pressure."
Remaining negotiation hurdles include EU demands on sustainability and environmental commitments, its Carbon Border Adjustment Mechanism (CBAM), greater access for its dairy products, and digital trade rules. India is seeking protections for its micro, small and medium enterprises (MSMEs), data localization safeguards, and phased tariff cuts in sensitive areas like automobiles.
The deal's timing is viewed as opportune with the US’ hostile attitude towards its trading partners including India.
According to experts, the timing of the deal seems ripe, and would help both nations to diversify supply chains away from concentrated geopolitical risk. For the EU, it offers a chance to diversify trade away from its "China+1" strategy, while India seeks to counterbalance trade frictions with the United States.
GTRI founder Ajay Srivastava emphasized the partnership's logic: "European machinery, components and precision inputs raise productivity in Indian factories, while Indian scale manufacturing delivers affordable, consumer-ready products to Europe."