Negotiating Growth: The EU-India Free Trade Agreement

The relationship between India and the European Union is founded on shared values and principles, including democracy, the rule of law, a rules-based international order, and multilateralism. The ties between the two parties are multifaceted and encompass a broad spectrum of areas, including investment, trade, climate change, science and technology, digital infrastructure, and connectivity. The bilateral relations between India and the EU date back to the 1960s, establishing one of the oldest diplomatic relations with the European Economic Community. The joint political statement signed in 1993, coupled with the Cooperation Agreement signed in 1994, opened the way for strengthening the bilateral ties. In 2000, the first EU-India summit was conducted, and a total of 15 have been conducted since then (MEA, 2025).

The two parties have been in talks for a Free Trade Agreement since the early 2000s, but the negotiations were paused due to disagreements on both sides. After a long halt, the negotiations restarted in 2022 and have intensified ever since. The current negotiations, which began again in 2022, are structured around three distinct agreements:

1. A Free Trade Agreement (FTA)

2. An Investment Protection Agreement

3. An Agreement on the protection of geographical indications.

By separating these areas, the parties aim to increase the probability of reaching a successful outcome in at least one or two areas, even if all three are not concluded simultaneously.

The EU is India’s largest trading partner, accounting for €124 billion in goods trade in 2023 (12.2% of India’s total trade), while India ranks as the EU’s 9th largest trading partner with 2.2% of EU goods trade. Services trade between the two surged to €59.7 billion in 2023 from €30.4 billion in 2020. These figures highlight deeper economic ties and mutual interdependence between the EU and India.

The main aim of the trade agreement will be to remove barriers, particularly helping smaller businesses. EU exporters will have an improved platform for exporting their goods to India, which is home to a large consumer base. The investment protection agreement will focus on ensuring a secure environment for investors through non-discrimination, protection against uncompensated expropriation, free transfer of returns, and a state-of-the-art dispute settlement mechanism. The pursuit of sustainable development commitments is a key objective of this agreement. The EU’s recognition of India’s potential to become a major economic power and its critical role in achieving net-zero carbon objectives. Another major push came in the form of a willingness to derisk its relations with China and the US (Ignacio García Bercero, 2025).

The negotiations are motivated not only by economic considerations but also by broader geopolitical goals. The agreement is seen as a way to strengthen the partnership between the EU and India and demonstrate commitment to cooperation in an increasingly global, competitive environment. Both parties aim to reduce their dependency on China, as too much power concentration in the hands of this nation might lead to a decline in global prosperity.  It would also serve as a statement against rising global protectionism. Ultimately, FTA is intended to advance not just trade volumes but also strategic objectives such as promoting multipolarity, balancing global power, and reducing vulnerabilities from overreliance on any single partner (Hanns Günther Hilpert, 2023).

The Free Trade Agreement (FTA) between the European Union (EU) and India has significant potential to enhance production efficiency and social welfare by lowering tariffs, reducing trade barriers and increasing market competition. This liberalisation enables firms to optimise resource allocation and encourages technological exchange, and allows consumers access to a wider range of affordable goods. According to a study by Mathur (2016) employing the SMART partial equilibrium model, India’s overall trade and welfare gains from the FTA would have been markedly greater if the United Kingdom had stayed in the EU, as Indian exporters would retain broader preferential access. After Brexit, these gains are reduced, especially in the consumer goods sector, because India’s direct access to the UK market through the EU framework is lost. While some improvements are seen in sectors such as raw materials and intermediate goods, the net positive impact is less pronounced. In agriculture, although efficiency and export volumes may rise post-FTA, the welfare benefits, particularly in processing food and beverages, are expected to decline. Nevertheless, greater liberalisation under the FTA remains beneficial for both sides: India would gain enhanced market access, technological diffusion and integration with European value chains, while the EU would secure a growing and diverse export market, expand supply chain options, and integration with European value chains, while the EU would secure a growing and diverse export market, expanded supply chain options, and increased opportunities in services and agricultural trade. Overall, moving towards trade liberalisation rather than protectionism is projected to yield substantial mutual economic benefits for both India and the EU.

However, the major challenges of the proposed FTA stem from high tariffs and protectionist policies in India, particularly on sensitive products such as automobiles, wine, dairy and agricultural goods. This creates a significant barrier for EU exporters and complicates liberalisation efforts. There exist certain regulatory complexities as well, including burdensome certification, licensing and testing requirements, along with sustainability-related regulations like the EU’s carbon border adjustment mechanism, which further hinder trade. India, being an economy endowed with skilled professionals, seeks easier mobility for the same, which is monitored and controlled by member states of the EU, limiting their work permits. Divergent interests in sensitive sectors can hamper India’s interests in safeguarding domestic markets and maintaining policy space. Limited drug production, due to the EU's intellectual property rights-focused approach, could raise medicine prices for India, which can prove to be a major disadvantage because the majority of Indian citizens heavily rely on Generic drugs as their medicinal source. Past trade disputes, such as EU bans on certain Indian products, have played a role in hampering the negotiations. Overall, the progress depends on both sides’ willingness to compromise and adapt.

Concurrently, on 10 March 2024, India signed a historic Trade and Economic Partnership agreement (TEPA) with the European Free Trade Association (EFTA) countries – Switzerland, Iceland, Norway and Liechtenstein, making it the first FTA with a bloc of four developed European nations. The agreement includes a binding commitment from EFTA countries to invest $100 billion in India and create 1 million jobs over 15 years, with provisions allowing India to suspend concessions if targets are not met. The TEPA aims at supporting the “Make in India” initiative and expanding access to European and global markets (PIB, 2024).

Together, the EU and EFTA agreements enhance India’s strategic and economic positioning in Europe, expanding trade opportunities, fostering investment, and strengthening bilateral cooperation in key sectors through mechanisms such as the newly established EU-India Trade and Technology Council. The ongoing EU-India FTA negotiations, alongside India’s recent TEPA with EFTA nations, reflect a deepening of India’s economic and strategic engagement with Europe. Rooted in shared democratic values and broad-based cooperation, these agreements aim to boost trade, attract investment, and advance sustainable development while also serving geopolitical objectives such as reducing dependency on China and promoting multipolarity. Despite several challenges, a successful FTA could generate significant economic growth (Affairs), job creation and technological collaboration, strengthening both partners’ roles in shaping a stable trade and political order. This article is written by EICBI Research Intern Shreya Sehgal References Affairs, M. o. (n.d.). India – EU Bilateral Relations. Delhi: Ministry of External Affairs.

Affairs, M. o. (2025). India – EU Bilateral Relations. Delhi: Ministry of External Affairs.

MEA. (2025). India – EU Bilateral Relations. MEA.

Ignacio García Bercero, A. S. (2025, july 7). bruegel. Retrieved from bruegel: https://www.bruegel.org/policy-brief/time-right-make-european-union-india-trade-deal-happen

Hanns Günther Hilpert, B. R. (2023). Negotiations on a Free Trade Agreement between India and the EU. ssoar.

Mathur, A. R. (2016). Brexit and India–EU Free Trade Agreement. Journal of Economic Integration.

PIB. (2024). India-EFTA Trade and Economic Partnership Agreement. New Delhi: PIB.