• India and the EU are aiming to finalize a free trade agreement by the end of the year.

• Talks over the years have faltered with areas such as agriculture, pharmaceuticals and vehicles becoming stumbling blocks.

• “The EU and India have the potential to be one of the defining partnerships of this century,” said European Commission President Ursula von der Leyen.

India and the European Union are pushing to finalize a free trade agreement by the end of the year.

The agreement would be “the largest deal of this kind anywhere in the world,” said European Commission President Ursula von der Leyen. Moreover, inking the deal would mark the end of years-long negotiations.

The final push comes as both India and the EU look to limit the impact of increasing fragmentation, protectionism and trade tariffs around the world. A deal could help mitigate the economic risks of rising geopolitical tensions.

“We both stand to lose from a world of spheres of influence and isolationism. And we both stand to gain from a world of cooperation and working together,” said von der Leyen in a speech while visiting India at the end of February.

Von der Leyen met Indian Prime Minister Narendra Modi in New Delhi to discuss the agreement. Modi said decisions were taken to “elevate and accelerate India-EU partnership“, with “trust and shared belief in democratic values” at its core.

Trade in goods between the EU and India.Image: European Commission

What does trade between India and the EU look like?

The EU is India’s largest trading partner, accounting for €124 billion of trade in goods in 2023, or 12.2% of total Indian trade. Trade in services between the EU and India reached nearly €60 billion in 2023, almost double the level in 2020. A third of that were digital services.

The US and China account for 10.8% and 10.5% of total Indian trade, respectively. India, meanwhile, is the EU’s ninth largest trading partner, accounting for 2.2% of the bloc’s trade.

Trade between India and the EU has grown by around 90% in the past decade, but talks over a free trade pact have stalled over the years due to significant discrepancies between the countries, especially on agriculture, automobiles and pharmaceuticals.

Trade in services between the EU and India.Image: European Commission

What would the pact cover?

In her speech in India, von der Leyen highlighted semiconductors, clean technology and artificial intelligence as key areas that would benefit from a trade agreement.

Reaching a deal will be complex, however, with significant concessions wanted on both sides in areas ranging from cars and alcohol to medical drugs and textiles.

The EU wants India to lower tariffs of more than 100% on cars, wine and whiskey. Meanwhile, India wants greater market access and lower tariffs for key exports, including pharmaceuticals, textiles and apparel.

EU imports and exports of services to and from India in 2022.Image: European Parliament

India has also objected to a number of EU rules relating to the environment, including border carbon taxes on steel, aluminium and cement.

In addition, India is seeking easier access to the EU for temporary work for skilled professionals, which would support its IT sector. It is also concerned that an influx of farm products from the EU, which benefit from significant subsidies, would hurt local farmers.

“The EU and India have the potential to be one of the defining partnerships of this century,” von der Leyen added in her speech. “It is why it will be a cornerstone of Europe’s foreign policy in the years and decades to come.”

A trade impact assessment in 2008 found the free trade agreement is expected to yield “positive real income effects for both the EU and India“, both in the short and long run, with real income gains ranging between €3 billion and €4.4 billion in the short-term for both.

https://www.weforum.org/stories/2025/03/eu-india-free-trade-agreement/