Why the India–EU Free Trade Agreement Matters at a Time of Global Uncertainty

What exactly was agreed between India and the European Union?

India and the European Union have concluded a long-pending Free Trade Agreement (FTA) at the India–EU Summit in New Delhi, marking the end of negotiations that have stretched across more than two decades. The agreement was finalised as the European Commission President and the President of the European Council visited India, shortly after attending the Republic Day celebrations as Chief Guests.

While details will be released in stages, officials on both sides have described the pact as a comprehensive agreement covering trade in goods and services, investment protection, regulatory cooperation and supply chain resilience. The deal is expected to lower tariffs, ease market access barriers and create more predictable trade rules between the two economies.

Why has this agreement taken so long to materialise?

Negotiations for an India–EU FTA began in the mid-2000s but were repeatedly stalled due to differences on sensitive issues. These included market access in agriculture and automobiles, intellectual property protection, labour and environmental standards, data localisation norms and public procurement.

Talks were formally relaunched in 2021, alongside negotiations on an investment protection agreement and geographical indications. Since then, sustained political engagement, particularly through 2025, helped bridge long-standing gaps. Officials say the changed global economic and geopolitical environment played a key role in pushing both sides towards compromise.

Why does the timing of the deal matter?

The agreement comes at a moment of heightened global economic uncertainty. Trade tensions have resurfaced following the return of aggressive tariff policies in the United States. Supply chains, already strained by the pandemic and geopolitical shocks, remain vulnerable. The Russia–Ukraine war continues to disrupt energy markets and global commerce.

Against this backdrop, the India–EU FTA signals a clear commitment to open and rules-based trade. At a time when protectionism and economic nationalism are re-emerging, the deal positions India and the EU as supporters of diversification, predictability and long-term economic cooperation.

How significant is the India–EU economic relationship today?

The European Union is India’s largest trading partner in goods. Bilateral trade stood at around USD 136 billion in 2024–25, with services trade also expanding steadily. European firms have increased investments in Indian manufacturing, renewable energy, infrastructure and digital services, while Indian companies have strengthened their presence in Europe in sectors such as IT services, pharmaceuticals and engineering.

Despite this scale, both sides have consistently described the relationship as underperforming relative to its potential. The FTA is intended to unlock this potential by reducing trade frictions and encouraging deeper economic integration.

What does India stand to gain from the agreement?

For India, the agreement offers improved access to one of the world’s largest consumer markets, comprising over 450 million people. Reduced tariffs and clearer regulatory pathways are expected to benefit Indian exports in sectors such as pharmaceuticals, textiles, engineering goods, IT services and chemicals.

The deal is also expected to attract greater European investment into India, particularly in clean energy, advanced manufacturing and digital infrastructure, aligning with India’s broader growth and industrialisation goals.

Why is the EU keen on deepening ties with India?

For the European Union, India represents a fast-growing major economy and a key partner in diversifying supply chains away from excessive dependence on a single geography. The agreement provides Europe with a stronger economic foothold in the Indo-Pacific region and supports its broader strategy of de-risking trade and investment.

The EU also sees India as a strategic partner that shares an interest in multilateralism and a rules-based international order, particularly at a time when global institutions face increasing strain.

Is this deal only about trade?

The FTA is widely viewed as the economic foundation of a broader strategic partnership. Over the past few years, India and the EU have expanded cooperation across defence and maritime security, climate action, clean energy, digital technologies, space and connectivity.

The creation of the India–EU Trade and Technology Council in 2022 reflected the recognition that trade, technology and security are increasingly interconnected. Joint naval exercises, cooperation on renewable energy and collaboration on digital standards have all reinforced this wider convergence.

What is the significance of the Republic Day symbolism?

The presence of the EU’s top leadership at India’s Republic Day celebrations has been interpreted as a strong political signal. It followed the first-ever collective visit of the EU College of Commissioners to India, underscoring Europe’s growing strategic focus on New Delhi.

Officials indicate that the symbolism was deliberate, signalling that the EU views India not merely as a trading partner, but as a central pillar of its Indo-Pacific and global strategy.

What challenges lie ahead in implementing the FTA?

While the agreement has been sealed, its implementation will require careful coordination. Aligning regulatory standards, managing domestic sensitivities in certain sectors and ensuring compliance with agreed commitments will be critical.

However, policymakers on both sides argue that the urgency created by global economic fragmentation has generated real momentum. The shared need to build resilient supply chains and stable partnerships has altered the cost-benefit calculus of delay.

What does this mean in the larger global context?

The India–EU FTA is likely to resonate beyond bilateral trade numbers. In a period marked by uncertainty, tariff wars and geopolitical rivalries, the agreement represents a choice in favour of cooperation and integration.

As two major democratic economies deepen their partnership, the deal stands as a statement that economic openness and