India-EU Free Trade Deal Near Finish Line: What Is In The FTA, Who Gains More, And What Are The Big Red Flags?

India and the European Union are close to concluding a long-sought free trade agreement (FTA), with an announcement expected on Tuesday at the India–EU Summit in New Delhi.

Here are key elements of the trade deal:

RATIFICATION AND IMPACT

Once signed, and ratified by the European Parliament, a process that could take at least a year, the pact could expand bilateral trade, and lift Indian exports such as textiles and jewellery, which have been hit by 50% U.S. tariffs since late August.

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However, a vote by EU lawmakers earlier this week to challenge the EU-South America pact in the bloc’s top court highlights how parliamentary hurdles could delay or complicate ratification.

Investment protection and geographical indications (GIs) are being negotiated separately, narrowing the FTA’s focus to goods, services and trade rules.

WHY IT MATTERS NOW

The pact would be India’s ninth trade agreement in four years, reflecting New Delhi’s push to secure market access as global trade turns more protectionist. For the EU, the deal supports supply-chain diversification and reduces reliance on China, while tapping India’s fast-growing $4.2 trillion economy.

GAINS FOR INDIA

The EU is among India’s top trading partners, along with the United States and China, with total bilateral goods and services trade exceeding $190 billion in 2024/25. India exported about $76 billion in goods and $30 billion in services to the 27-nation bloc.

Average EU tariffs on Indian goods are relatively low at about 3.8%, but labour-intensive sectors such as textiles and garments face duties of around 10%, according to Global Trade Research Initiative, a Delhi-based think tank.

The FTA would help restore competitiveness lost after the EU began withdrawing tariff concessions under Generalised System of Preferences (GSP) in 2023, on products including garments, pharmaceuticals and machinery, and offset the impact of higher U.S. tariffs.

India is also seeking access for its professionals and export of IT services.

GAINS FOR EU

EU exports to India face much higher barriers, with a weighted-average tariff of about 9.3% on $60.7 billion of goods in 2024/25.

Duties are particularly steep on automobiles, auto parts, chemicals and plastics. Tariff cuts would open opportunities in cars, machinery, aircraft and chemicals, while improving access to services, procurement and investment in one of the world’s fastest-growing large markets.

KEY STICKING POINTS

Agriculture and dairy are excluded. India is resisting EU demands to eliminate tariffs on more than 95% of goods, signalling closer to 90%.

Autos, wine and spirits remain sensitive. India is considering phased cuts or limited quotas rather than sharp tariff reductions, citing risks to domestic manufacturing.

SERVICES AND RULES

India wants “data-secure” status under EU data rules, easier movement of professionals and relief from double social security payments.

The EU is seeking broader access to India’s financial and legal services and commitments on labour, environment and intellectual property – areas where New Delhi prefers flexibility.

INDIA’S RED FLAGS

Two major concerns are the EU’s carbon border levy, which could blunt tariff gains for Indian exporters, and high non-tariff barriers such as regulatory delays, stringent standards and certification costs.

WHAT COMES NEXT

Analysts say geopolitics and trade shocks have pushed both sides towards a pragmatic, executable compromise. Whether the pact delivers balanced gains will depend on how carbon levies, services mobility and non-tariff barriers are ultimately handled.

(With inputs from Reuters)

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