Opinion Two decades on, India-EU trade deal may happen. But it has to be made to work on the ground

India and the EU are major trade partners, with bilateral goods trade valued at $136 billion in 2024-25. Indian exports to the EU stood at $76 billion, while imports from the EU amounted to $60 billion. Negotiations between India and the EU ran through 15 rounds but stalled in 2013 amid differences over market access, labour standards, government procurement, environmental clauses and data protection. By 2021, the global context shifted dramatically. Supply-chain realignments, disruptions caused by the pandemic and geopolitical uncertainty prompted negotiations to resume.

India’s exports to the EU are currently dominated by mineral products (nearly 20 per cent), machinery (around 15 per cent), and a mix of chemicals and textiles (around 6 per cent each). New Delhi is pushing for tariff reductions in labour-intensive sectors such as textiles, leather, footwear and jewellery, where EU duties range from 8 to 16 per cent.

For the EU, negotiations have focused on reducing India’s high tariffs on wines, spirits and automobiles, often as high as 150-200 per cent. These issues were among the primary deal-breakers in earlier negotiations. A calibrated reduction in these tariffs would open one of the world’s largest and fastest-growing markets to European businesses.

According to available reports, an agreement has been reached on roughly 20 of the 24 negotiating chapters, with the remaining ones concentrated in sensitive areas such as agriculture, automobiles, steel and data governance. India’s red lines on agriculture and dairy are unlikely to shift, reflecting concerns over farmer livelihoods and food security.

Data governance remains another contested area. India is seeking recognition as a “data-secure” country to enable smoother cross-border data flows, while the EU has pressed New Delhi to adopt stronger privacy frameworks aligned with EU standards. Sustainability and labour provisions have also figured prominently. The EU’s Carbon Border Adjustment Mechanism (CBAM), which levies carbon-linked charges on imports such as steel, has emerged as a non-tariff barrier for Indian exporters, particularly for small and medium enterprises (SMEs). Limited awareness, monitoring capacity and compliance resources are acting as initial challenges in this regulatory shift for Indian SMEs. Similarly, the EU Deforestation Regulation could affect India’s leather and meat exports if traceability requirements are not met.

From the European perspective, India’s Quality Control Orders and Bureau of Indian Standards certification requirements have constrained access for certain manufactured goods, including automotive components and electronics. Greater regulatory transparency and mutual recognition mechanisms will be essential to address these concerns.

Although discussions over an India-EU trade agreement have stretched over two decades, the past few years have injected renewed urgency, driven by a fragmented global economy and the growing weaponisation of tariffs. Trade tensions among major blocs have intensified, prompting India to accelerate diversification away from excessive reliance on the US and China. For the EU, the agreement offers a strategic economic entry into the Indo-Pacific. If concluded, the FTA could deliver much-needed predictability and stability to a market encompassing nearly two billion people.

At present, India’s trade with the EU remains concentrated in a handful of countries such as the Netherlands, Germany, France, Italy and Belgium, contributing over 70 per cent of total bilateral trade. A comprehensive FTA could, for the first time, enable a genuinely pan-European economic partnership, extending India’s market access across the bloc.

Yet, the success of such agreements is often determined not at the negotiating table but in domestic implementation. For India, realising the benefits of an India-EU FTA will require an enabling manufacturing ecosystem through sustained domestic reforms in ease of doing business, regulatory simplification and logistics connectivity. Export competitiveness will depend on expanding the product basket beyond traditional strengths and building manufacturing capabilities aligned with European quality and sustainability standards.

Seamless international logistics and connectivity will be central to scaling trade volumes. In this context, the India-Middle East-Europe Economic Corridor (IMEC) could emerge as a strategic enabler, linking Indian and European markets through multimodal connectivity. Greater regulatory alignment and digital integration could further unlock market access for high-value sectors such as chemicals and pharmaceuticals. Beyond goods, expanded access to IT and services could help India diversify workforce mobility away from the US.

If concluded and ratified, the India-EU trade agreement could emerge as a template for future strategic trade arrangements in a multipolar world. For India, momentum with the EU may also strengthen its hand in eventual trade negotiations with the US. After two decades of hesitation, the convergence of strategic interests suggests that the timing may finally be right.

Hussain is Co-founder, and Kathotia is Research Assistant, at the Bureau of Research on Industry and Economic Fundamentals (BRIEF), New Delhi. Views expressed are personal