India, EU to announce conclusion of FTA negotiations on Jan 27

New Delhi: India and the European Union are set to announce on January 27 the conclusion of negotiations and the finalisation of a free trade agreement aimed at boosting economic ties between the two regions amid disruptions in global trade due to US tariffs, an official said.

The pact is nearing the finishing line after 18 years of negotiations. The talks started in 2007.

Commerce and Industry Minister Piyush Goyal has termed this free trade agreement (FTA) "the mother of all deals" the country has signed so far.

The conclusion of talks for the agreement will be announced in the India-EU (European Union) Summit here, the official said.

European Commission President Ursula von der Leyen landed here on January 24 for a four-day visit.

President of the European Council Antonio Costa and von der Leyen will hold summit talks with Prime Minister Narendra Modi on January 27.

While India and the 27-nation bloc EU will announce closure of FTA talks this week, it will be signed after legal vetting of the text on a mutually agreed date. Implementation of the deal may take some time, as it requires approval from the EU Parliament. In India, it requires only the nod of the Union Cabinet.

The pact is likely to provide duty free access to a number of Indian goods from labour intensive sectors such as textiles, chemicals, gems and jewellery, electrical machinery, leather and footwear.

The EU's tariffs on Indian goods are about 3.8 per cent, but labour-intensive sectors attract about 10 per cent import duty. India's weighted average duty on EU goods is about 9.3 per cent, with particularly high duties on automobiles, parts (35.5 per cent), plastics (10.4 per cent), and chemicals and pharmaceuticals (9.9 per cent).

Both sides are likely to consider extending quota-based duty concessions on cars. Like for Australia and the UK, India may provide a tariff rate quota on European wines under the agreement. India imposes a duty of 100-125 per cent on alcoholic beverages.

Sensitive agriculture issues have been kept out of the deal. The EU has been protective of its beef, sugar and rice markets. India, on the other hand, has protected its farm and dairy sectors from competition, as the livelihoods of large numbers of small and marginal farmers depend on them.

Dairy has been excluded from all FTAs that India has signed so far.

In an FTA, two sides reduce or eliminate import duties on over 90 per cent of goods traded between them. An FTA also liberalises norms to promote trade in services sectors such as telecommunications, transportation, accounting, and auditing. The NDA government has finalised seven trade pacts since 2014: Australia, the UK, Oman, New Zealand, the UAE, the EFTA bloc, and Mauritius.

This pact is important, as the US' imposition of high tariffs has disrupted global trade flows. 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.

Besides FTA, the two are also negotiating a pact in investment protection and Geographical Indications (GI). The India-EU FTA covers 24 chapters, including trade in goods, services and investment.

Bilateral trade

India's bilateral trade in goods with the EU was USD 136.53 billion in 2024-25 (exports worth USD 75.85 billion and imports worth USD 60.68 billion), making the EU India's largest goods trading partner. The services trade in 2024 was USD 83.10 billion.

India has a trade surplus of USD 15.17 billion in 2024-25.

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.

As per reports, the EU, with a GDP of about USD 20 trillion and a population of over 450 million, is the major global trade player, exporting about USD 2.9 trillion and importing more than USD 2.6 trillion annually.

India, with a population of 1.4 billion, exported USD 437 billion in goods and USD 387.5 billion in services. It imported goods worth USD 720 billion and services worth USD 195 billion in 2024-25.

India's major goods exports to EU in FY2025 included petroleum products (USD 15 billion); electronics (USD 11.3 billion - smartphone USD 4.3 billion); textiles (USD 1.6 billion - garments USD 4.5 billion); machinery, computer (USD 5 billion); organic chemicals (USD 5.1 billion); iron and steel (USD 4.9 billion), gems and Jewellery (USD 2.5 billion); pharma (USD 3 billion); auto parts (USD 1.6 billion); footwear (USD 809 million); and coffee (USD 775 million).

The main imports included machinery, computer (USD 13.0 billion); electronics (USD 9.4 billion - mobile phone parts-USD 3.7 billion, ICs USD 890.5 million); aircraft (USD 6.3 billion); medical devices, scientific instruments (USD 3.8 billion); gems and jewellery (USD 3 billion - rough diamonds USD 1.7 billion); organic chemicals (USD 2.3 billion); plastics (USD 2.3 billion).

India's key services exports to the EU were other business services, telecommunication and IT, transportation services. Imports included intellectual property services, telecommunication and IT.

Investment

The EU is also a major investor in India. India's cumulative FDI inflows from the EU during April 2000 to September 2024 were USD 117.4 billion with 6,000 EU firms present in India. FDI from the EU represented over 16.5 per cent of the cumulative amount of FDI equity inflows from all countries.

India's FDI outflows to the EU are valued at about USD 40.04 billion from April 2000 to March 2024.

Mother of all deals

Once concluded, this would be India's largest FTA in both economic size and regulatory scope. As the EU is a customs union, the agreement would give India preferential access to all 27 EU countries under a single framework.

The EU includes France, Germany, Spain, Italy, Austria, Belgium, Bulgaria, Finland, Hungary, Ireland, the Netherlands, Portugal, Poland, Denmark, and Sweden.

Some sticking issues

According to think tank GTRI, India is pushing hard to resolve the CBAM (carbon border adjustment mechanism) issue in the FTA talks because it risks undermining the core benefits of tariff liberalisation.

The EU's CBAM, already in force for products such as steel and aluminium, effectively acts as a new border charge on Indian exports, even if import duties are eliminated under the FTA, it said.

India is also seeking EU recognition as a "data-secure" country under EUs General Data Protection Regulation (GDPR), which would allow smoother transfer of EU citizens' data. Without it, Indian firms face higher compliance costs than competitors from Japan or South Korea.