India and EU Set to Announce Free Trade Agreement Conclusion

India-EU Trade Agreement Overview

By Manoj Kumar and Shivangi Acharya

Key Benefits of the Agreement

NEW DELHI, Jan 23 (Reuters) - India and the European Union are expected to announce the conclusion of protracted negotiations for a free trade pact on Tuesday, opening the way for reduced tariffs on European cars and wine and expanded market for Indian electronics, textiles and chemicals, two Indian and EU government sources said.

Challenges and Concerns

The announcement could follow Indian Prime Minister Narendra Modi's meeting with European Council President Antonio Costa and European Commission President Ursula von der Leyen, who will co-chair an India-EU summit during their visit to India from January 25 to 28, one of the Indian government sources said.

Recent Trade Developments

If finalised and ratified by the European Parliament, a process that could take at least a year, the trade pact would boost Indian exports such as textiles and jewellery, the official said. Negotiations were relaunched in 2022 after a nine-year pause, gaining traction last year amid rising trade tensions.

In August, President Donald Trump doubled tariffs on Indian imports to as much as 50%, among the highest in the world.

At the World Economic Forum in Davos on Tuesday, von der Leyen signalled progress, stating the European Union is close to concluding the agreement but acknowledged that additional work remains.

The agreement comes days after the EU signed a pivotal pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland.

During the same period, New Delhi finalised pacts with Britain, New Zealand and Oman.

The spate of deals underscores global efforts to hedge against the United States as Trump's bid to take over Greenland and tariff threats on European nations test longstanding alliances among Western nations.

Bilateral trade between India and the EU totalled $136.5 billion in 2024/25 fiscal year ending March, making the 27-nation bloc one of India's biggest trading partners.

"Negotiators are still trying to bridge differences on several sensitive issues, including India's reluctance to sharply cut tariffs on auto imports," an EU government source said.

Indian and EU government sources declined to be identified as the matter is not yet public. India's commerce ministry did not immediately respond to an email requesting comment.

NON-TARIFF BARRIERS

A key concern for New Delhi is a range of non-tariff barriers such as the newly introduced carbon levies on imports of goods including steel, aluminium, cement, with industry experts saying there was little scope for relaxation.

Duty-free access to the EU could help offset losses for Indian textile and jewellery exporters in the U.S., Ajay Srivastava, founder of the Delhi-based think tank Global Trade Research Initiative, said, while noting regulatory hurdles remain.

"An India–EU FTA would cut tariffs on textiles, garments and leather, letting Indian exporters compete more evenly with Bangladesh and Vietnam," he added.

The EU imports nearly $125 billion of textiles annually, where India holds a 5–6% share versus China's 30%, highlighting the potential gains from an FTA amid rising U.S. tariffs.

India's autos, electronics, textiles, pharmaceuticals and chemicals are likely to emerge as key beneficiaries of a potential India–EU free trade agreement, according to Jefferies.

Some sensitive agricultural items have been excluded from negotiations, an Indian trade ministry official earlier said.

(Reporting by Manoj Kumar and Shivangi Acharya; Additional reporting by Philip Blenkinsop in Brussels; Editing by Jacqueline Wong)