India-EU FTA Gains Momentum Amid Trump's Tariff Threats
Tuesday, 25 March 2025, 18:53 IST
As former U.S. President Donald Trump’s tariff threats continue to impact global trade, India and the European Union (EU) are working towards finalizing the India-EU Free Trade Agreement (FTA) by the end of 2025. If successful, the deal would mark a significant boost to economic ties, as negotiations have been ongoing since 2007.
Last month, European Commission President Ursula von der Leyen, accompanied by members of the European College of Commissioners, visited India and held delegation-level talks with Prime Minister Narendra Modi. Both leaders instructed their teams to resolve outstanding issues and conclude the agreement by year-end. Between March 10 and March 14, India and the EU held the 10th round of negotiations in Brussels, addressing key concerns to advance the trade deal. If finalized, the FTA is expected to be a major talking point at a potential India-EU summit later this year.
The economic impact of the deal could be substantial. In FY 2024, bilateral trade in goods and services between India and the EU reached approximately $190 billion, with India exporting $106 billion and importing over $82 billion. Experts believe that the FTA could further enhance trade and investment, opening new opportunities for both economies.
According to Indian government data, EU companies have invested around $118 billion in India since 2000, making up 17% of total FDI inflows. This exceeds the combined investments from the USA, Japan, China, and Russia. The EU’s economic footprint in India is extensive, with nearly 6,000 European firms operating in the country. However, accurately tracking foreign direct investment (FDI) remains a challenge, as nearly half of all FDI inflows into India come via Mauritius and Singapore, which serve as key investment hubs. Meanwhile, Indian firms have invested around $40 billion in the EU over the past 25 years, strengthening economic interdependence.
The India-EU strategic partnership, established in 2004, has always been centered around trade and investment. Unlike other areas of cooperation—such as foreign policy, internal security, and migration—trade falls exclusively under EU jurisdiction rather than individual member states. The FTA negotiations were initiated in 2007 under the Bilateral Trade and Investment Agreement (BTIA), following the recommendations of the High-Level Trade Group set up under the 2005 Joint Action Plan. At the time, the United Kingdom was still a member of the EU, and the agreement aimed to cover multiple sectors, including trade in goods and services, investment, public procurement, technical regulations, intellectual property rights, competition policy, and dispute settlement.
During the early years of negotiations, both India and the EU were optimistic about the agreement, as India’s economy was expanding rapidly, and the EU was buoyed by its enlargement and the adoption of the single currency. However, disagreements over automobiles, wines and spirits, dairy products, and the movement of professionals led to delays. Issues such as data security and public procurement also remained unresolved.
In 2008, at the ninth India-EU summit in France, then-Prime Minister Manmohan Singh and EU leaders announced their commitment to finalizing the deal by 2009. However, momentum stalled as the EU focused on financial crises in the Eurozone, while India grappled with policy paralysis from 2010 onward. Despite setbacks, both sides attempted to revive discussions at the 2010 EU-India summit in Brussels, setting a new target for spring 2011. However, after 12 rounds of formal negotiations and multiple missed deadlines, talks froze in 2013 due to a “mismatch in the level of ambitions.”
With global trade shifting in response to rising protectionism and geopolitical tensions, the India-EU FTA negotiations have regained urgency. If concluded, the agreement could strengthen India’s position in global trade while offering European businesses expanded market access in one of the world’s fastest-growing economies.
Last month, European Commission President Ursula von der Leyen, accompanied by members of the European College of Commissioners, visited India and held delegation-level talks with Prime Minister Narendra Modi. Both leaders instructed their teams to resolve outstanding issues and conclude the agreement by year-end. Between March 10 and March 14, India and the EU held the 10th round of negotiations in Brussels, addressing key concerns to advance the trade deal. If finalized, the FTA is expected to be a major talking point at a potential India-EU summit later this year.
The economic impact of the deal could be substantial. In FY 2024, bilateral trade in goods and services between India and the EU reached approximately $190 billion, with India exporting $106 billion and importing over $82 billion. Experts believe that the FTA could further enhance trade and investment, opening new opportunities for both economies.
According to Indian government data, EU companies have invested around $118 billion in India since 2000, making up 17% of total FDI inflows. This exceeds the combined investments from the USA, Japan, China, and Russia. The EU’s economic footprint in India is extensive, with nearly 6,000 European firms operating in the country. However, accurately tracking foreign direct investment (FDI) remains a challenge, as nearly half of all FDI inflows into India come via Mauritius and Singapore, which serve as key investment hubs. Meanwhile, Indian firms have invested around $40 billion in the EU over the past 25 years, strengthening economic interdependence.
The India-EU strategic partnership, established in 2004, has always been centered around trade and investment. Unlike other areas of cooperation—such as foreign policy, internal security, and migration—trade falls exclusively under EU jurisdiction rather than individual member states. The FTA negotiations were initiated in 2007 under the Bilateral Trade and Investment Agreement (BTIA), following the recommendations of the High-Level Trade Group set up under the 2005 Joint Action Plan. At the time, the United Kingdom was still a member of the EU, and the agreement aimed to cover multiple sectors, including trade in goods and services, investment, public procurement, technical regulations, intellectual property rights, competition policy, and dispute settlement.
During the early years of negotiations, both India and the EU were optimistic about the agreement, as India’s economy was expanding rapidly, and the EU was buoyed by its enlargement and the adoption of the single currency. However, disagreements over automobiles, wines and spirits, dairy products, and the movement of professionals led to delays. Issues such as data security and public procurement also remained unresolved.
In 2008, at the ninth India-EU summit in France, then-Prime Minister Manmohan Singh and EU leaders announced their commitment to finalizing the deal by 2009. However, momentum stalled as the EU focused on financial crises in the Eurozone, while India grappled with policy paralysis from 2010 onward. Despite setbacks, both sides attempted to revive discussions at the 2010 EU-India summit in Brussels, setting a new target for spring 2011. However, after 12 rounds of formal negotiations and multiple missed deadlines, talks froze in 2013 due to a “mismatch in the level of ambitions.”
With global trade shifting in response to rising protectionism and geopolitical tensions, the India-EU FTA negotiations have regained urgency. If concluded, the agreement could strengthen India’s position in global trade while offering European businesses expanded market access in one of the world’s fastest-growing economies.
