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India-EU ‘mother of all deals’: What it might look like, and red flags | All we know ahead of R-Day summit
The two sides are set to announce the conclusion of negotiations on the much-awaited Free Trade Agreement at the India-EU summit on January 27.
India and the European Union are on the verge of clinching a long-awaited Free Trade Agreement (FTA), with an announcement expected on Tuesday at the India–EU Summit in Delhi.
European Commission President Ursula von der Leyen and the President of the European Council, Antonio Costawill, be in India from January 25 to 27 as Republic Day chief guests, and hold summit talks with Prime Minister Narendra Modi.
This would mark a major milestone in India’s trade diplomacy and deepen economic ties with one of the world’s largest trading blocs.
What the deal means for India at this time
Once signed and ratified by the European Parliament, a process that could take at least a year, the agreement is expected to significantly expand bilateral trade. It could provide a timely boost to Indian exports such as textiles and jewellery, which have been hit hard by 50 per cent US tariffs since late August, Reuters reported.
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Notably, investment protection and geographical indications (GIs) are being negotiated separately, narrowing the FTA’s immediate focus to goods, services and trade rules.
The agreement would be India’s ninth trade deal in four years, reflecting the country’s push to secure market access as global trade becomes increasingly protectionist. US President Donald Trump has imposed a massive 50% tariff rate on India as he tries to push the Modi government to cut its oil purchases from longtime ally Russia due to the war in Ukraine. India has diplomatically held its ground but has been looking eastward to China and other trading partners.
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For the EU, the deal supports supply-chain diversification, reduces reliance on China, and opens doors to India’s fast-growing $4.2 trillion economy.
What India stands to gain: Key numbers
- The EU is among India’s top trading partners, alongside the US and China, with total goods and services trade exceeding $190 billion in 2024-25.
- India exported roughly $76 billion in goods and $30 billion in services to the 27-nation bloc during the year.
- While average EU tariffs on Indian goods are low at around 3.8 per cent, labour-intensive sectors such as textiles and garments face duties of about 10 per cent.
- The FTA could help restore competitiveness lost after the EU began withdrawing tariff concessions under its Generalised System of Preferences (GSP) in 2023 on products such as garments, pharmaceuticals and machinery.
- India is also pushing for greater access for its professionals and easier exports of IT services.
What the EU is eyeing
EU exports to India face a much higher weighted-average tariff of about 9.3 per cent on $60.7 billion worth of goods in 2024/25. Duties are especially steep on automobiles, auto parts, chemicals and plastics.
Tariff cuts could unlock opportunities in cars, machinery, aircraft and chemicals, while improving access to services, procurement and investment in one of the world’s fastest-growing large markets.
Red flags that could slow or dilute the deal
Despite the optimism, several sensitive issues remain unresolved. Agriculture and dairy have been excluded from the deal.
India is resisting EU demands to eliminate tariffs on more than 95 per cent of goods, signalling a ceiling closer to 90 per cent.
Automobiles, wine and spirits remain sensitive sectors, with India favouring phased tariff cuts or limited quotas to protect domestic manufacturing.
The EU’s carbon border levy, which could blunt the benefits of tariff cuts for Indian exporters, is another of Delhi's concerns, reports said.
Then there are allied, non-tariff issues such as regulatory delays, stringent standards and costly certifications.
India is seeking “data-secure” status under EU data protection rules, easier movement of professionals, and relief from double social security contributions.
The EU, meanwhile, is pushing for wider access to India’s financial and legal services, along with stronger commitments on labour standards, environmental norms and intellectual property; areas where India prefers greater flexibility.
Besides the FTA, the two sides are likely to unveil a defence framework pact and a strategic agenda at the January 25-27 summit. India and the European Union have been strategic partners since 2004.
(with inputs from news agencies)
