India and the European Union are on the cusp of a free trade agreement that could become one of the defining pivots of India’s economic rise. After years of cautious diplomacy, the negotiations have reached a point where a deal could reshape global supply chains, anchor India in Europe’s trade architecture, and offer Indian industry a stable, rules-based alternative to an increasingly unpredictable global trading system.
On Wednesday, Commerce and Industry Minister Piyush Goyal said the “air is pregnant with possibilities” and that both sides are committed to closing the deal early, after meetings with a high-level EU delegation that included Trade Commissioner Maros Sefcovic.
For Europe, trade has always been the foundation of prosperity. Nearly 30 million EU jobs depend on trade, and almost half its GDP comes from it. Yet its relationship with the United States, its largest partner, has become a permanent crisis-management exercise. In Washington, protectionist fervour now cuts across party lines. Whether under Democrats or Republicans, tariffs and “reindustrialisation” are political gospel. Last August’s EU-US deal narrowly averted a full trade war, but left deep political bruises in Brussels.
For European policymakers, this is the new normal: a transatlantic economic relationship sustained by firefighting, not foresight. Diversifying supply chains and securing new markets is no longer optional—it’s survival strategy. And that makes India indispensable.
For India, too, the moment is ripe. The global economy is fragmenting into blocs: US-led industrial nationalism on one side, China’s state-led mercantilism on the other. Between them lies a vast demand for a reliable, rules-based partner with scale, stability, and democratic legitimacy. An India-EU FTA delivers exactly that.
Also Read: India-EU agenda can fundamentally alter global geopolitics—if Europe stands up to Trump
The biggest trade partnership in the making
The EU remains the world’s largest trader, accounting for roughly 16 per cent of global commerce. An FTA with India, one of the world’s fastest-growing major economies, would be the largest such agreement in economic weight ever concluded.
The strategic benefits flow both ways. For the EU, it’s a gateway to reduce dependence on China for critical raw materials, rare earth magnets, and electronic components. For India, it’s a way to secure predictable access to high-value markets—a crucial offset to the loss of the Generalised System of Preferences (GSP) and a chance to level the playing field against competitors like Vietnam and Bangladesh.
Equally important, it offers India a trusted alternative to the volatility of US trade politics. Stability, consistency, transparency—traits that mark out European regulation—are precisely what Indian businesses need today.
The politics and the optics
Both sides understand the political stakes. The goal is not merely to sign another trade agreement but to announce a new phase in India-EU relations, ideally on Republic Day, with the President of the European Commission, Ursula von der Leyen, as the chief guest at the parade. A deal signed in Delhi would be a powerful symbol of convergence between two democratic, open economies.
But for the EU, optics must align with substance. Brussels has made clear that any agreement has to be “ratifiable”—a deal that collapses in the European Parliament would be worse than none at all. The same holds true in India. The politics of trade liberalisation remain delicate, but the national mood has shifted. As one senior policymaker put it, India is in a “new 1991 moment”—a phase of confident, reform-oriented thinking, where opening up is seen not as surrender to external pressure but as a sovereign, strategic choice.
The difficult conversations
The hardest sticking points are well-known. On the EU side, automobiles top the list. Without meaningful tariff or volume concessions on the mid- and high-end segments, European manufacturers find it hard to justify fresh investment in Indian assembly and production.
The EU also wants stronger protection for investors—predictable tax policies, transparent dispute resolution, and treatment on par with domestic players. India’s newer model Bilateral Investment Treaties (BITs), cautious after past arbitration cases, need strengthening to meet those expectations.
Then comes sustainability. Brussels wants India to align with its evolving green trade architecture—be it the Carbon Border Adjustment Mechanism (CBAM), supply chain due diligence standards, or corporate sustainability disclosures (CSRD). India’s negotiators rightly seek flexibility and time-bound transitions, but there’s no escaping that the green frontier is now the new tariff wall.
From India’s side, the sensitivities are equally real. Tariffs on automobiles and spirits are politically sensitive and deeply entrenched. Yet industry leaders now recognise that phased, calibrated concessions are essential if India wants reciprocal access to Europe’s markets for textiles, pharmaceuticals, and engineering goods.
Quality control and regulatory predictability are another pain point. The proliferation of Quality Control Orders (QCOs)—originally designed to limit low-quality Chinese imports—has swept in European exporters too, creating uncertainty. Some rollback is already under discussion, but alignment on standards, testing, and certification remains a must. Without mutual recognition of laboratories and certifiers, even compliant firms face costly delays.
The same applies to data and digital trade. Without EU recognition of India as “data secure,” high-end collaborations in AI, robotics, and advanced manufacturing remain out of reach. For the world’s most dynamic digital economy, that’s an opportunity cost India can ill afford.
The new mindset in Indian industry
For decades, Indian business saw trade agreements as sources of threat rather than opportunity. That mindset is changing. Today, key sectors—auto components, engineering goods, chemicals, and electronics—see Europe as a stable, high-value partner. They believe Indian firms can meet European standards with adequate transition time and capacity-building.
India already supplies advanced driver assistance systems and high-safety components to Daimler, Volvo, and other EU companies. These partnerships show that Indian industry can match global technical standards when the policy framework is predictable and stable.
What industry wants now are three things: clarity on future regulations, MFN-equivalent treatment to ensure no discrimination after signing, and a credible, transparent process for future rule changes.
Also Read: EU is evolving into a security actor. It opens new doors for India
A defining test of strategic maturity
For both sides, small issues now risk holding big ambitions hostage. India’s leadership understands that finishing this FTA will require coordinated political management across ministries—from Finance on taxation and investment treaty matters, to the Quality Council of India on standards and lab accreditation.
For Europe, the task is to avoid overreach. The perfect should not become the enemy of the good. Overloading the agreement with non-trade conditionalities will make it politically unsellable in Delhi and practically unenforceable on the ground.
Both sides should keep the focus where it belongs: market access, investment confidence, and regulatory trust.
An India-EU FTA is far more than a trade negotiation—it’s a test of whether two large democracies can craft a pragmatic partnership in a polarising world.
If clinched, it would send a powerful signal: that open economies still have agency amidst protectionist headwinds, that rule-based trade can still be built on trust and mutual benefit.
The window is narrow, the politics complex—but history rewards those who move with purpose. For India and Europe, this is that moment.
Now is the time to close the deal.
Shishir Priyadarshi is president, Chintan Research Foundation. Views are personal.
(Edited by Asavari Singh)