As global trade patterns shift amid geopolitical tensions and supply chain challenges, the proposed India-EU Free Trade Agreement (FTA) emerges as a critical framework for equitable growth and collaboration. This agreement is set to enhance trade volumes along with technological, investment, and institutional ties between these two vibrant economies. The initiative for an India-EU FTA is not solely economic; it bears significant strategic implications. Given the European Union’s sluggish economic recovery, increasing protectionist measures in the US, and reliance on restricted supply chains, India presents itself as a dependable partner, offering growth prospects, stability, and diversification. For India, the FTA is poised to improve competitiveness, draw quality foreign investment, and facilitate greater access to advanced technologies and markets.
In the context of global uncertainties, including the Russia-Ukraine conflict, fluctuating energy prices, and evolving security alliances, the FTA is anticipated to act as a stabilizing force, fostering mutual resilience and long-term strategic alignment between the two regions. In recent years, the EU has solidified its position as one of India’s most significant trading partners, with bilateral trade in goods surging nearly 36 percent from $90 billion in 2020-21 to $136 billion projected for 2024-25. Notably, India’s trade growth with the EU has outpaced that with the United States, underscoring Europe’s rising significance in India’s international trade strategy. India’s exports to the EU have transformed markedly, showcasing both traditional industries and emerging sectors.
The top twenty exported goods represent over 83 percent of total exports, blending labor-intensive products like textiles and jewelry with high-value exports such as electronics and pharmaceuticals. The EU is also a vital source of advanced industrial inputs and high-tech products for India, with major imports encompassing machinery and electrical equipment, which are crucial for India’s manufacturing and energy sectors. These imports bolster India’s industrial capacity and align with national initiatives like Make in India and Atmanirbhar Bharat, integrating global supply chains with local production. Investment ties between India and the EU are equally remarkable, with the EU having invested over $117 billion in India, making it one of the largest foreign investors in the nation.
Conversely, Indian firms have invested around $40 billion in Europe, particularly in pharmaceuticals, IT services, and renewable energy. Significant advancements in trade negotiations have been made in areas such as customs facilitation and intellectual property rights, with both parties aiming to finalize the agreement by December 2025, paving the way for a comprehensive and progressive trade partnership in India’s economic landscape.