India - EU Free Trade Agreement (FTA) Negotiations

On May 16, 2025, India and the European Union (EU) concluded the 11th round of negotiations for their proposed Free Trade Agreement (FTA) in New Delhi, marking a pivotal step toward deepening economic ties in a volatile global trade landscape. Both sides have agreed to pursue a two-phase approach to finalize the deal by the end of 2025, a strategy driven by uncertainties stemming from U.S. tariff policies under President Donald Trump. The FTA, covering 23 policy areas, aims to enhance market access for goods, services, and investment, with bilateral goods trade already valued at $137.41 billion in 2023–24. This article provides a comprehensive, researched analysis of the 11th round, the rationale and structure of the two-phase strategy, and the broader implications for India, the EU, and global trade dynamics. By exploring historical context, key sectors, political dimensions, challenges, and comparative perspectives, it seeks to illuminate the significance of this moment in India-EU relations, while critically examining the complexities and potential pitfalls of the negotiations.

The FTA is not merely a trade pact; it represents a strategic alignment between a rising economic power and a 27-nation bloc seeking to bolster its global influence. With the EU accounting for 17% of India’s total exports and India representing 9% of EU overseas sales, the stakes are high. The two-phase approach, inspired by India’s trade agreements with Australia and ongoing U.S. talks, aims to secure early wins while deferring contentious issues. This article delves into the intricacies of the negotiations, offering a nuanced understanding of the opportunities and challenges ahead.

Historical Context of India-EU Trade Relations

India and the EU have cultivated economic ties since the 1960s, with formal diplomatic relations established in 1962. Over decades, the EU has become India’s largest trading partner for goods, with bilateral trade reaching $137.41 billion in 2023–24, including $75.92 billion in Indian exports and $61.48 billion in imports. Trade in services, valued at $51.45 billion in 2023, further underscores the depth of this relationship. The first attempt at an FTA began in 2007 but stalled in 2013 due to disagreements over market access, tariff liberalization, and intellectual property rights (IPR). India’s reluctance to open its auto and agricultural sectors clashed with the EU’s demands for duty cuts on automobiles, wines, and spirits, as well as stronger IPR protections, leading to an eight-year hiatus.

Negotiations resumed in June 2022, driven by mutual recognition of the need to counter global trade uncertainties, including Brexit, rising protectionism, and China’s economic dominance. The India-EU Leaders’ Meeting in Porto on May 8, 2021, set the stage for this revival, with both sides agreeing to pursue a balanced, ambitious, and mutually beneficial FTA, alongside separate Investment Protection Agreement (IPA) and Geographical Indications (GI) Agreement. Since 2022, talks have progressed through 11 rounds, addressing complex issues like rules of origin, sanitary measures, and sustainable development. The historical context reveals the challenges of aligning diverse economic interests but also the growing urgency to finalize the FTA amid geopolitical shifts.

The resumption reflects a strategic pivot for both parties. For India, the FTA is an opportunity to enhance export competitiveness and integrate into global value chains. For the EU, it offers access to one of the world’s fastest-growing markets, especially as Europe faces economic challenges. The 11th round builds on this renewed momentum, leveraging lessons from past failures to navigate current complexities.

The 11th Round: Key Developments and Focus Areas

The 11th round of India-EU FTA negotiations, held in New Delhi from May 12–16, 2025, was a critical milestone. An official source confirmed the round’s conclusion, noting that both sides agreed to finalize the deal in two phases due to global trade uncertainties, particularly U.S. tariff actions. The negotiations, led by chief negotiators, focused on market access for goods, services, and investment, spanning 23 policy areas, including trade in goods, services, customs procedures, intellectual property, and sustainable development. The discussions built on the 10th round in Brussels (March 2025), which advanced talks on sanitary measures, dispute settlement, and regulatory practices.

Commerce and Industry Minister Piyush Goyal’s visit to Brussels on May 1, 2025, set the stage, with Goyal emphasizing a fair and equitable trade agenda. The two-phase approach emerged as a pragmatic response to complex issues, with Phase 1 targeting areas of convergence, such as market access and customs facilitation, and Phase 2 addressing contentious topics like IPR and sustainability. Emerging concerns, such as the EU’s carbon tax and India’s Quality Control Orders (QCOs), were also discussed, reflecting their significance. Sentiment on X highlighted progress in aligning tariff schedules and regulatory frameworks, though some posts noted ongoing tensions over IPR and auto tariffs.

The 11th round’s focus on core trade issues signals a commitment to early outcomes. India pushed for enhanced market access for exports like ready-made garments and pharmaceuticals, while the EU sought duty cuts on automobiles, wines, and spirits. The phased strategy mirrors India’s approach in other trade deals, offering a framework to navigate global volatility while addressing domestic sensitivities.

The Two-Phase Approach: Rationale and Structure

The two-phase approach is a cornerstone of the India-EU FTA negotiations, designed to address the complexities of aligning diverse economic priorities. The strategy, influenced by U.S. tariff policies, prioritizes areas of convergence in Phase 1, such as market access for goods and services, customs procedures, and rules of origin. Phase 2, targeted for completion by year-end, will tackle more challenging issues, including IPR, sustainability, and government procurement. This approach draws inspiration from India’s FTA with Australia, where a phased strategy enabled early implementation of core provisions, and ongoing U.S. talks, reflecting a broader trend in global trade negotiations.

The phased approach offers several advantages: it builds momentum, secures tangible benefits early, and allows negotiators time to resolve contentious issues. For instance, Phase 1 could eliminate tariffs on a significant portion of Indian exports, enhancing competitiveness in sectors like textiles and pharmaceuticals. However, risks remain, including potential delays in Phase 2 and the possibility of diluted outcomes if disagreements persist. The EU’s demands for duty cuts on automobiles and a robust IPR regime pose challenges for India, which seeks to protect domestic industries and ensure affordable access to medicines. Sentiment on X suggests optimism about the phased approach but cautions against overpromising on timelines.

The strategy aligns with India’s broader trade policy, which emphasizes flexibility in navigating global protectionism. The EU’s willingness to adopt this approach reflects its recognition of India’s developmental priorities and the need for a balanced agreement. The success of the two-phase approach will depend on both sides’ ability to maintain momentum and bridge gaps in Phase 2.

Key Sectors and Economic Impacts

The India-EU FTA holds immense potential to transform bilateral trade, particularly for Indian exports. Sectors like ready-made garments, pharmaceuticals, steel, petroleum products, and electrical machinery are expected to gain a competitive edge in the EU market, which accounts for 17% of India’s total exports. In 2023–24, India’s exports to the EU were valued at $75.92 billion, and the FTA could lower tariffs and non-tariff barriers, boosting market share. The pharmaceutical sector, a global leader in generic drugs, could benefit from streamlined regulatory approvals, enhancing access to the EU’s $300 billion market. Similarly, textiles and steel could see increased demand with reduced trade barriers.

The EU seeks significant duty reductions on automobiles, medical devices, wines, and spirits, as well as a stronger IPR regime. The EU exports over $2 billion in automobiles and auto parts to India annually, often in completely knocked-down (CKD) form, facing a 15% tariff. Lowering these tariffs could make European luxury brands like BMW and Mercedes more affordable, but it raises concerns among Indian automakers, who employ over 40 million people and contribute one-third of India’s manufacturing GDP. Domestic manufacturers fear job losses and reduced incentives for local production, a concern echoed in India’s reluctance to lower auto tariffs in FTAs with Japan and South Korea.

Bilateral trade in services, valued at $51.45 billion in 2023, is another critical area. The FTA aims to facilitate access for Indian IT professionals and service providers in the EU, while the EU seeks opportunities in financial and professional services. The agreement could attract investment, with the proposed Investment Protection Agreement (IPA) providing legal certainty. Posts on X highlight the FTA’s potential to enhance export competitiveness, though some express concerns about its impact on domestic industries. Balancing these economic gains with domestic sensitivities will be crucial for India’s negotiators.

Political and Diplomatic Dimensions

The FTA negotiations are underpinned by strong political will. On February 28, 2025, Prime Minister Narendra Modi and European Commission President Ursula von der Leyen committed to concluding the deal by year-end, a pledge that shaped the 11th round’s agenda. Von der Leyen’s visit to India in February 2025, accompanied by 22 EU Commissioners, reinvigorated momentum, as noted in posts on X. Commerce Minister Piyush Goyal’s engagement with EU counterparts, including his May 1, 2025, visit to Brussels, reinforced India’s push for equitable trade terms, emphasizing the principle of “common but differentiated responsibility” to account for India’s developmental stage.

The geopolitical context is significant. U.S. tariff threats have accelerated India-EU efforts, positioning the FTA as a counter to protectionism. India’s advocacy for flexibility on sustainability and labor standards reflects its status as a developing nation, while the EU sees the FTA as a gateway to India’s growing market amid economic challenges in Europe. High-level dialogues under the India-EU Trade and Technology Council (TTC), established in 2022, have fostered trust, with discussions extending to AI, semiconductors, and green energy. These diplomatic efforts underscore the strategic importance of the partnership, which transcends trade to encompass broader cooperation.

The political commitment is tempered by domestic pressures. In India, stakeholders like the auto industry and farmers express concerns about increased competition, while the EU faces internal debates over balancing trade liberalization with sustainability goals. The ability to navigate these pressures will determine the FTA’s success.

Additional Agreements and Broader Cooperation

Beyond the FTA, India and the EU are negotiating an Investment Protection Agreement (IPA) and an Agreement on Geographical Indications (GIs). The IPA aims to provide legal certainty for EU investors, encouraging investment in India’s manufacturing and services sectors. The GI Agreement seeks to protect products like Basmati rice and Darjeeling tea, enhancing their market value in the EU. These agreements complement the FTA, strengthening economic ties.

The FTA is part of a broader strategic partnership. The 11th round discussed digital trade, supply chain resilience, and green technology, reflecting shared priorities in addressing global challenges. The TTC has facilitated collaboration in AI, semiconductors, and clean energy, positioning the FTA as a cornerstone of India-EU relations. Posts on X highlight the FTA’s role in addressing issues like the EU’s carbon tax, indicating its relevance to global challenges. This multifaceted approach enhances the partnership’s resilience, aligning economic goals with strategic objectives.

The broader cooperation extends to areas like connectivity, sustainable urbanization, and women’s empowerment, as discussed during von der Leyen’s February 2025 visit. These initiatives reflect the FTA’s role as a catalyst for deeper engagement, with potential to shape India-EU relations for decades.

Challenges and Criticisms

The FTA faces significant challenges. Disagreements over market liberalization, particularly in automobiles and agriculture, persist. The EU’s demands for duty cuts and a robust IPR regime clash with India’s concerns about protecting domestic industries and ensuring affordable access to medicines. India’s auto sector, a major economic pillar, opposes tariff reductions, fearing competition from European imports. Similarly, the pharmaceutical industry worries about stringent IPR rules that could limit generic drug production, a critical component of India’s global health contributions.

The EU’s emphasis on sustainability, gender, and labor standards has sparked debate. India argues that such commitments should account for its developmental stage, adhering to the principle of “common but differentiated responsibility.” Critics warn that the phased approach risks delaying critical issues, potentially diluting theFTA’s impact. Domestic stakeholders, including farmers and small businesses, express concerns about increased competition from EU imports, a sentiment echoed in posts on X. For instance, some posts question the FTA’s benefits for India’s agricultural sector, highlighting the need for protective measures.

The EU also faces internal challenges, with member states balancing economic interests against sustainability goals. The carbon tax, which imposes costs on carbon-intensive imports, has raised concerns in India about its impact on steel and cement exports. These challenges underscore the need for flexibility and compromise to ensure a mutually beneficial agreement. The phased approach, while pragmatic, must be carefully managed to avoid prolonged negotiations or weakened outcomes.

Comparative Analysis with Other FTAs

India’s FTA with the EU can be contextualized by its agreements with Australia, the UK, and the European Free Trade Association (EFTA). The India-Australia FTA, implemented in phases, offers a model for balancing immediate gains with long-term negotiations. Phase 1 of the Australia deal eliminated tariffs on 85% of Indian exports, providing a template for the EU’s Phase 1. The India-UK FTA, concluded on May 6, 2025, addressed similar issues like market access and IPR, with India securing concessions on professional mobility while offering duty cuts on select UK vehicles. The EFTA agreement, signed in March 2024, secured a $100 billion investment commitment, highlighting India’s ability to negotiate strategic deals.

The EU, as a 27-nation bloc, presents unique challenges due to its diverse interests and stringent standards. Unlike the UK or Australia, the EU’s focus on sustainability and regulatory harmonization requires India to navigate complex negotiations. For instance, the EU’s carbon tax and labor standards are more rigorous than those in the UK or EFTA deals. India’s experience with these FTAs has strengthened its negotiating capacity, enabling it to protect domestic interests while securing market access abroad. Lessons from the UK FTA, such as addressing visa barriers for Indian professionals, could inform the EU negotiations.

The comparative analysis highlights the EU FTA’s complexity but also India’s growing expertise in trade negotiations. The two-phase approach, while novel for the EU, aligns with India’s strategic shift toward flexible trade agreements, as seen in its Australia and U.S. talks. The EU’s willingness to adopt this approach suggests a pragmatic adaptation to India’s priorities, setting the stage for a potentially transformative deal.

Future Prospects and Conclusion

The India-EU FTA is poised to reshape bilateral trade and strengthen strategic ties. With the 11th round concluded and a two-phase approach in place, both sides are on track to meet their year-end deadline. Phase 1 could deliver immediate benefits, such as tariff reductions on Indian exports, while Phase 2 will test their ability to resolve contentious issues like IPR and sustainability. The FTA promises significant economic gains, from boosting Indian exports to attracting EU investment, with bilateral trade projected to grow substantially.

For India, the FTA offers a chance to enhance its global trade profile and counter protectionist trends. By securing market access for key sectors, India can strengthen its position in global value chains. For the EU, the agreement provides access to a dynamic market and a partner in addressing global challenges like climate change and digital transformation. However, success hinges on resolving disagreements and balancing domestic priorities. India must protect its auto and agricultural sectors while leveraging the FTA’s opportunities, while the EU must accommodate India’s developmental needs without compromising its standards.

The broader strategic partnership, encompassing the IPA, GI Agreement, and TTC initiatives, enhances the FTA’s significance. Sentiment on X reflects cautious optimism, with some praising the FTA’s potential and others urging vigilance to protect domestic interests. As negotiations progress, both sides must prioritize mutual gains and flexibility to ensure a balanced agreement. The India-EU FTA is a testament to the power of cooperation in an uncertain world, with the potential to redefine economic relations and set a precedent for future trade agreements.

Abhisht Chaturvedi is a Research Analyst at Insights International. His research interests include tech policy, media, and communications.