New Delhi- India and the European Union are expected to formally announce the conclusion of negotiations on a long-pending free trade agreement on January 27, in what leaders on both sides have described as the “mother of all deals”.
The agreement, under discussion for over a decade, is seen as a major milestone in strengthening economic ties between India and the EU amid rising global trade uncertainties, according to reports.
A research note by Emkay Global dated January 25 said a comprehensive free trade agreement could substantially improve India’s trade position with the EU. The deal could widen India’s trade surplus with the bloc by more than $50 billion by FY31 and increase the EU’s share in India’s total exports to about 22–23 per cent, up from 17.3 per cent in FY25, giving a significant boost to export growth.
Although India currently accounts for only around 0.8 per cent of the EU’s export market, the agreement is gaining strategic importance for Europe as well. The EU’s trade balance with India has shifted sharply, moving from a surplus of $3 billion in FY19 to a deficit of $15 billion in FY25.
The proposed pact also aligns with Europe’s broader strategy to reduce dependence on China and diversify global supply chains.
According to Emkay Global, much of the expected benefit would come from a gradual shift in the composition of India’s exports to the EU. Higher-value products such as electronics, machinery and chemicals are likely to gain a larger share, moving beyond traditional labour-intensive goods. This is particularly significant as the EU’s share in India’s exports has slipped to 16.8 per cent so far in FY26.
Europe’s reduced reliance on Russian energy and its push to source more goods from outside China have already boosted demand for Indian products such as refined fuels, electronics and chemicals. A free trade agreement could further strengthen these trends by lowering trade barriers and increasing predictability.
In FY25, total goods trade between India and the EU crossed $136 billion, with India’s imports from the bloc at $60.7 billion and exports valued at $75.9 billion.
Trade experts note that bilateral trade is largely complementary rather than competitive. Ajay Srivastava, founder of the Global Trade Research Initiative, said Indian exports to the EU—including smartphones, garments, footwear, tyres, pharmaceuticals, auto components, refined fuels and cut diamonds—largely replace imports that Europe earlier sourced from other countries, as many manufacturing activities had already been offshored by European firms.
EU exports to India, meanwhile, consist of high-end machinery, aircraft, key electronic components, chemicals, advanced medical devices and metal scrap. These inputs support Indian manufacturing, recycling units and MSME clusters, enhancing productivity and export competitiveness.
The proposed agreement is expected to reduce or eliminate tariffs on India’s labour-intensive exports, while giving European companies improved access to the Indian market for premium automobiles and wines. Srivastava noted that since India and the EU specialise in different segments of the economy, tariff reductions are likely to lower costs rather than displace domestic industries.
— With inputs from IANS