The India-EU FTA hold potential to double bilateral trade every five years

India and the European Union (EU), two of the world’s largest democracies representing nearly two billion people and contributing about 21 percent of global GDP, are poised to usher in a new chapter of global trade through a landmark Free Trade Agreement (FTA). As the world navigates through shifting trade patterns, geopolitical conflicts, and supply chain disruptions, the India–EU FTA stands out as a framework for equitable growth and strategic collaboration. It promises not only to boost trade volumes but also to deepen technological, investment, and institutional linkages between the two dynamic economies.

Expanding Economic Engagement

The European Union has emerged as one of India’s most strong trade partners, with bilateral trade in goods expanding by nearly 36 percent over the past five years from USD 90 billion in 2020–21 to USD 136 billion in 2024–25. Notably, India’s trade with the EU has grown at a faster pace than its trade with the United States, reflecting Europe’s increasing importance in India’s external sector strategy. India’s merchandise trade with USA expanded by 32% from USD 89 billion in 2020-21 to USD 132 billion in 2024-25 as compared with a 36% growth with EU from 2020-21 to 2024-25. The services sector has also been gaining momentum, with India -EU bilateral trade in services estimated at USD 52 billion in 2024-25. The EU accounts for approximately 16 percent of India’s total merchandise exports, underlining its central position in India’s global trade trajectory.

India – EU bilateral merchandise trade trajectory (USD Billion)

The Diversified Export-Import Basket

India’s exports to the European Union have undergone a remarkable transformation in recent years, reflecting both the strength of traditional industries and the rise of new-age sectors. The top twenty export items account for over 83 percent of total exports, combining labour-intensive products such as textiles, footwear, and jewellery with high-value exports including electronics, engineering goods, machinery, pharmaceuticals, and organic chemicals. While gems and jewellery continue to symbolize India’s craftsmanship and cultural richness, the growing presence of pharmaceuticals and IT-related products reflects the country’s expanding role in global manufacturing and knowledge-based exports. With enhanced market access under the FTA, India’s high-technology and manufacturing sectors are expected to gain even stronger footholds in European markets

India’s merchandise exports to the EU (Top 20 Items at 2 Digits level)

Imports from EU strengthen India’s manufacturing base

The EU is a crucial source of advanced industrial inputs and high-technology products for India. The major imports include machinery, nuclear reactors, and boilers, essential for India’s manufacturing and energy industries. Electrical machinery and electronics supporting India’s growing technology and renewable energy sectors. Medical and optical equipment contributing to healthcare modernization. Pharmaceutical products and organic chemicals serving as raw materials for India’s vast chemical and drug industries. Aircraft, vehicles, and transport equipment reflecting the EU’s role as a leader in high-end engineering products. These imports strengthen India’s industrial capabilities and align with national priorities such as Make in India and Atmanirbhar Bharat by integrating global supply chains with local production.

India’s top 20 items of imports from EU (USD Billion)

Investment Synergies and Sustainable Development

Investment relations between India and the European Union are equally impressive. The EU has invested over USD 117 billion in India, making it one of the largest foreign investors in the country. In return, Indian companies have invested around USD 40 billion in Europe, particularly in sectors such as pharmaceuticals, IT services, and renewable energy. The investment relations are now evolving beyond traditional investment areas toward joint ventures in sustainable infrastructure, green technologies, and urban development. Both sides are collaborating in renewable energy projects, circular economy initiatives, waste management systems, and digital connectivity. These areas of cooperation not only promote sustainable growth but also reflect the shared commitment of India and the EU to achieving their climate and development goals.

Trade Negotiations Continues….

The journey of the India–EU Free Trade Agreement began in 2007 but faced a long pause in 2013 due to divergent ambitions and complex negotiations. Talks resumed in 2022 with renewed energy, recognizing the strategic and economic imperatives of deeper engagement. Since then, thirteen rounds of discussions have been completed, with the fourteenth round scheduled for October 2025. Substantial progress has already been achieved in areas such as customs facilitation, intellectual property rights, transparency, and dispute resolution. Both sides are now determined to conclude the agreement by December 2025, setting the stage for one of the most comprehensive and forward-looking trade partnerships in India’s modern economic history.

Strategic Importance in a Changing World

The push toward an India–EU FTA is not merely economic, it is deeply strategic. With the European Union facing slow economic recovery, rising protectionism in US, and dependence on limited supply chains, India emerges as a natural and reliable partner offering growth, stability, and diversification. Conversely, for India, the agreement will enhance competitiveness, attract quality foreign investment, and provide greater access to high-end technologies and markets. Amid global uncertainties such as the Russia–Ukraine conflict, energy price volatility, and changing security alliances, the FTA will serve as a stabilizing force, promoting mutual resilience and long-term strategic alignment between the two regions.

Transformative Economic Gains

A comprehensive India–EU FTA will unlock wide-ranging opportunities for both sides. It will reduce tariffs across key manufacturing sectors such as textiles, engineering goods, and pharmaceuticals, while opening avenues for India’s expanding IT and digital services to reach European consumers. The agreement will also boost investor confidence by providing legal certainty and stronger protections, encouraging greater flows of foreign direct investment into India’s manufacturing and services industries.

Enhanced access to green technologies and advanced industrial processes from Europe will accelerate India’s transition toward a sustainable and innovation-driven economy. For European firms, India presents immense opportunities in sectors such as telecommunications, finance, logistics, and advanced manufacturing. The resulting trade and investment flows will create new employment avenues, enhance productivity, and reduce dependence on traditional supply hubs, paving the way for a more balanced global economic order.

A Partnership for shared progress

In conclusions, together, India and the European Union account for a combined GDP of around USD 24 trillion, approximately 21 percent of global GDP, making their prospective FTA one of the largest economic corridors in the world. In an era marked by economic realignments and shifting alliances, this partnership transcends traditional trade cooperation. It represents a vision for a multipolar, resilient, and inclusive global economy. The India–EU FTA is not merely an agreement of commerce; it is an alliance of shared values, mutual trust, and future-oriented growth. By combining India’s demographic dynamism with Europe’s technological and institutional strengths, the two partners are positioned to set new benchmarks for global cooperation. This partnership, once realized, will not only strengthen their respective economies but also shape the contours of global trade and sustainable development for decades to come.

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