India and the European Union are set to announce the conclusion of their Free Trade Agreement (FTA) on Tuesday that will create a free market region of two 2 billion people having a combined economic output of $ 27 trillion.
The agreement that comes as the world reacts to shocks emerging from the US, will result in moving 90% of the trade between India and EU to zero or very low tariffs.
The deal is already bothering the US with US Treasury Secretary Scott Bessent criticising “virtue signalling” European allies of not acting decisively against India and continued participation in Russian energy trade because “they wanted a big trade deal with India”.
The US has not reacted very favorably to thaw in trade ties between Canada and China. Bessent’s comments suggest that the India-EU deal is also being watched closely in Washington.
The India-EU agreement negotiations have been ongoing since July 2022 but acquired speed and urgency after US President Donald Trump’s stance on global trade and his attempts to redraw the global value chains.
For finalising the deal the top leadership of the EU led by European Commission President Ursula von der Leyen has already landed in New Delhi. On their agenda is participation in 77th Republic Day celebrations as chief guests and India-EU Summit a day later.
To reach an agreement quickly the agriculture and dairy sectors have been kept out of the final deal and ambition on opening up trade has been scaled down to 90% of the sectors from 95% targeted earlier.
The EU has been protective of its beef, sugar and rice markets. India on the other hand has shielded its farm and dairy sector from competition. Within the farm sector the EU aggressively seeks markets for dairy products like cheese and wines.
Dairy has been kept out of India-EU FTA.
Compromises in Agriculture and Auto
The key asks of India in any trade deal of zero duty access to labour intensive sectors like textiles and apparel, gems and jewellery, leather have been met. In services also India has likely secured greater access through a more liberal regime for travel and stay in the 27-country economic bloc.
The 9th High-Level Dialogue on Migration and Mobility in November 2025 proposed a pilot European Legal Gateway Office in India for ICT professionals and exploring comprehensive mobility frameworks for young professionals. At the end of 2024, a total of 931,607 Indian citizens resided in the EU. India’s services exports to the EU were around $ 43 billion while imports were $ 34 billion in 2024.
The way around India’s concerns on opening up the market for automobiles and wines from the EU has been found through quotas and phased reduction in tariffs.
Indian goods already face relatively low average tariffs in the EU—about 3.8% of $75.9 billion of exports in FY2025—but key labour-intensive sectors such as textiles and clothing still face duties of around 10%.
Strategic Shield
Removing these tariffs would deliver clear export gains. An FTA would restore lost market access, lower tariffs on key exports such as garments, pharmaceuticals, steel, petroleum products and machinery, and help Indian firms better absorb shocks from higher US tariffs, trade policy think-tank Global Trade Research Initiative said.
EU goods face much higher barriers in India: a weighted average tariff of about 9.3% on $60.7 billion of exports, with particularly high duties on automobiles, parts (35.5%), plastics (10.4%), and chemicals and pharmaceuticals (9.9%), significantly raising market-entry costs for European firms. Reducing these tariffs would improve EU access to Indian markets, it said.
An FTA would unlock significant opportunities for European Union exporters in aircraft, machinery, chemicals and other high-value manufactured goods, while expanding access in services, government procurement and investment.
India’s exports to the EU largely replace third-country imports, not EU manufacturing, which has long offshored these sectors. The EU exports of machinery, aircraft, electronics, chemicals and scrap directly feed India’s factories, MSMEs and recycling industry.
Because both economies specialise in different segments, tariff elimination works as a cost-reduction tool rather than a displacement shock. An India–EU FTA would thus deliver classic trade gains—higher volumes, deeper integration and stronger industrial competitiveness on both sides, GTRI founder Ajay Srivastava said.