India-EU FTA: The year 2025 has been defined by renewed trade tensions and shifting alliances as nations seek new partnerships to buffer global uncertainty. Among the most closely watched developments is the India–EU FTA, which could redefine the contours of commerce between New Delhi and Brussels. After years of stalled talks, negotiations have gathered pace. Both sides now aim to conclude the pact by the end of 2025. The proposed deal holds wide-ranging significance — covering trade, investment, technology, and geopolitics — and could deepen the strategic partnership between two of the world’s largest democratic economies.
A seven-member delegation from the European Parliament’s Committee on International Trade recently visited India to review progress. The European Parliament, which must ratify the agreement, has highlighted the importance of transparency and alignment with EU trade standards. Talks that restarted in June 2022 now span over a dozen chapters, covering goods and services trade, investment protection, geographical indications, and sustainable development. The 14th round concluded in Brussels earlier this month, with negotiators targeting a signed deal by December.
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But hurdles remain for India-EU FTA — chief among them market access. The EU wants India to lower tariffs on automobiles, wines, and spirits, while also seeking stronger commitments on regulatory cooperation and rules of origin. For its part, India wants a balanced deal that preserves domestic interests and expands export opportunities.
Digital trade and data governance
A crucial yet under-discussed dimension of the India-EU FTA is digital trade and data governance. The two sides hold divergent positions on data protection and localisation. While the EU insists on GDPR-compliant privacy norms, India’s Digital Personal Data Protection Act, 2023 gives the government wide discretion over data transfers.
Bridging this gap is essential for cooperation in IT services, e-commerce, and fintech — areas where India has a strong competitive advantage. A well-calibrated framework on digital trade could turn this FTA into a next-generation agreement that looks beyond tariffs.
The promise of market access and FDI
The EU is already India’s third-largest trading partner, with bilateral goods trade in 2024 reaching €120.05 billion, according to the European Commission. A successful India-EU FTA would unlock even greater opportunities.
For India, the benefits go beyond tariffs. A deal would strengthen the “Make in India” initiative and attract foreign direct investment (FDI) from Europe—vital at a time when foreign portfolio inflows (FPI) have slowed. By aligning with a large, rules-based market, Indian firms could access advanced manufacturing supply chains and expand their services footprint in Europe.
If implemented effectively, the pact could also boost investor confidence and job creation, making it a critical step toward India’s ambition of becoming a global supply-chain hub.
Beyond tariff reductions, the EU’s emphasis on labour, environment, and human rights standards could prove another negotiating challenge. Brussels increasingly links trade access to compliance with international conventions and sustainability goals under the Paris Agreement. India, while advancing renewable energy and labour reforms, must ensure that such clauses do not become tools of green protectionism or restrict developmental flexibility. A balanced approach—acknowledging climate responsibility without constraining industrial growth—will be key to a lasting pact.
Why Europe needs India
The incentives are strong on the European side too. The EU economy has struggled with sluggish growth, energy insecurity, and technological decline. The fallout from the Nord Stream shutdown pushed up energy prices, eroding industrial competitiveness and household purchasing power.
At the same time, Europe’s industrial base faces growing pressure from China and the US. The Draghi Report noted that nearly 30% of Europe’s unicorns have migrated to the US, and only four of the world’s top 50 tech firms are EU-based. Meanwhile, China’s Belt and Road Initiative and America’s tech dominance have expanded their global influence.
To regain its footing, Brussels needs trusted partners with large markets and stable governance. India—an expanding economy driven by a growing middle class and a thriving services sector—fits that bill.
While tariff negotiations attract most attention, the services sector remains India’s biggest stake in the India-EU FTA. India seeks easier visa norms and mutual recognition of professional qualifications across Europe for IT, healthcare, and engineering professionals. For a services-driven economy like India’s, a breakthrough on mobility would yield far greater gains than tariff cuts. A truly comprehensive FTA must facilitate not only trade in goods, but also the movement of talent and innovation that underpins global competitiveness.
CBAM: The carbon tax hurdle
The thorniest issue remains the EU’s Carbon Border Adjustment Mechanism (CBAM). The policy imposes a carbon tax on imports such as steel, aluminium, cement, and fertilisers — all critical to India’s export basket. New Delhi views CBAM as a form of green protectionism that penalises developing economies lacking Europe’s decarbonisation infrastructure.
While EU officials insist the measure prevents carbon leakage and supports climate goals, India argues that uniform standards without financial or technological support are unfair. Unless Brussels introduces flexibility or exemptions for partners like India, CBAM could derail the entire deal.
Strategic and geopolitical relevance
The India-EU FTA is also strategically significant. For Brussels, it forms part of the EU–India Connectivity Partnership and supports its broader Indo-Pacific Strategy, aimed at diversifying trade away from China. For India, it complements efforts to reduce overdependence on both Beijing and Washington by building a diversified set of economic partners. In an increasingly multipolar world, the agreement would reinforce strategic autonomy for both sides while strengthening global supply-chain resilience.
Both sides recognise that the geopolitical clock is ticking. As global trade fragments into competing blocs, securing the India-EU FTA would send a powerful signal of economic cooperation and political trust. Delays risk eroding momentum and giving competitors a head start in shaping trade norms.
A timely agreement would give both parties the first-mover advantage in setting frameworks for sustainable, transparent trade. Yet, speed cannot come at the expense of substance. India is right to safeguard its farmers, MSMEs, and regulatory autonomy. The EU, in turn, must prove that this is a meaningful partnership, not a symbolic one.
In a world of supply-chain realignments and friend-shoring, India and Europe need each other more than ever. The challenge is to balance ambition with realism—and act before opportunity fades.