India moves ahead on EU deal as US pact hangs fire

Commerce Secretary Agarwal told reporters: “We were already in the last and most arduous leg of the negotiations with the EU for three months. We are very close now. We have closed 20 out of 24 chapters. There are a few issues on which the negotiations are ongoing. We are virtually engaged on a day-to-day basis. We are trying to see if we can meet the timeline before our leaders meet.”

India-EU deal among biggest trade agreements in history

In the backdrop of volatile US trade measures, the urgency of signing the deal is from both sides, as New Delhi has closed as many as three trade deals in 2025, and the EU signed a long-pending deal with Mercosur, a South American trade bloc.

When signed and implemented, the India-EU deal will be one of the largest trade agreements signed by New Delhi, somewhat blunting the impact of steep US tariffs, raising opportunities for Indian labour-intensive exports in the EU.

A government official said sensitive agricultural issues from both sides are off the table. The official was responding to the question based on reports that agriculture has been kept out of the trade deal.

Euractiv, a European news website, reported Thursday that Ursula von der Leyen, in a closed-door meeting with European parliamentarians, said the EU is set to sign a free trade agreement with India this month that excludes agriculture.

Agriculture has been one of the most sensitive issues for India and a major roadblock to signing the trade deal with the US. Washington has been pressing India to purchase genetically modified (GM) products such as corn and soya.

Agriculture has also been a major concern for the EU. Reuters reported Thursday that French farmers drove tractors into Paris to protest against an EU-Mercosur trade deal they say threatens local agriculture by creating unfair competition with cheaper South American imports.

India and the EU talks have faced significant challenges due to sensitive issues around carbon tax, whisky and automobiles. Germany, the largest exporter of automobiles in the EU, has been pushing for market access in India. However, New Delhi also has a fast-growing automobile sector, which is also one of the largest employment-generating sectors.

For India, the carbon tax has posed the biggest challenge in signing the trade deal, as a steeper duty on metal exports could reverse gains that would be accrued during the trade deal negotiations.

The EU, starting January 1, began implementing the world’s first carbon tax. In its current form, CBAM would apply a carbon-related charge to the import of goods from the power sector and energy-intensive industrial sectors, such as cement, steel, aluminium, oil refinery, paper, glass, chemical and fertilisers from countries with lower environmental ambitions and regulations than the EU.

But CBAM has provisions for the bloc’s lawmakers to expand the list of items that will bear a levy. India largely exports aluminium, iron and steel to the EU, which are expected to be impacted due to the regulation.

Uncertainty has created new markets

Uncertainty around the US trade deal had created significant urgency for India to explore new markets. In November, the Commerce and Industry Ministry asked trade lawyers working on the trade deals to refrain from taking leave.

Several high-level meetings have happened in just the last few months where Commerce and Industry Minister Piyush Goyal met EU trade commissioner Marco Sefcovic.

This comes as Indian exporters are worried about the loss of orders due to US tariffs. The Indian Express had reported that negotiations between Indian apparel manufacturers and US importers have stalled for summer orders, worth around $2 billion for Indian exporters.

Exporters said that the absence of a trade deal would push the bulk of summer orders to the country’s competitors, such as Bangladesh, Vietnam and even China, which face lower tariffs compared to the highest tariffs of 50 per cent imposed on India. Industry sources also said that orders are already shifting to other countries, and missing the summer orders could have a long-term impact.