Why the EU-India trade deal matters now

AS India prepares to celebrate Republic Day on January 26 and hosts the European Union on January 27 for its annual summit in New Delhi, attention turns once again to the long-anticipated EU-India Free Trade Agreement (FTA). Originally set to be concluded by the end of 2025, negotiations on the FTA have stretched beyond initial expectations.

However, notable diplomatic momentum in the opening weeks of 2026, marked by a series of high-level engagements and intensified negotiations, signals continued determination on both sides to expedite the agreement's conclusion by the end of January.

On January 9, India's Commerce and Industry Minister Piyush Goyal concluded a two-day visit to Brussels, following preparatory engagements earlier in the month. After talks with European Commissioner for Trade and Economic Security Maroš Šefcovic, Goyal indicated that remaining differences were narrowing and that negotiations had entered their final phase.

His visit followed External Affairs Minister S Jaishankar's trip to France and Luxembourg earlier in the month, as well as India's participation, for the first time, in discussions with the Weimar Triangle, signalling New Delhi's growing engagement with key European groupings.

European leaders have reinforced this momentum. During German Chancellor Friedrich Merz's visit to India on January 12, he suggested that Brussels and New Delhi could finalise the FTA by the end of the month, highlighting the strategic impetus driving negotiations.

This has been complemented by parallel diplomatic engagements, including a visit by French Presidential Diplomatic Adviser Emmanuel Bonne ahead of President Emmanuel Macron's planned visit in February, as well as a visit by Polish Foreign Minister Radoslaw Sikorski on January 17-19.

EU-India FTA negotiations have spanned nearly two decades. First launched in 2007, suspended for several years and formally revived in 2022, their longevity reflects both the scale of ambition on both sides and the political sensitivities involved.

Against a backdrop of growing fragmentation in the global trade environment, marked by transatlantic uncertainty, structural dependencies and supply-chain vulnerabilities, Brussels' search for reliable, long-term partners has sharpened.

An EU-India FTA offers a strategic pathway to diversify Europe's economic relationships, deepen engagement with a market of over 1.4 billion people and anchor cooperation within a rules-based framework aligned with shared principles.

Outstanding issues

Despite evident political momentum, several unresolved issues continue to constrain finalisation of the FTA. Market access remains one of the most persistent points of contention. The EU is pressing for deeper tariff reductions in high-value sectors such as automobiles and medical devices, while India remains cautious about liberalisation that could affect domestic manufacturers and small businesses.

The EU has sought to protect its domestic steel industry through tariffs, quotas and safeguard measures, alongside increasing emphasis on climate-linked regulation. India, by contrast, has raised concerns over restricted access to the European market and the cumulative impact of trade-defence instruments on its exporters.

Agriculture is expected to remain largely excluded from the agreement. Given the sector's political sensitivity and the scale of employment it supports in India, New Delhi has shown little willingness to open this market freely, limiting the scope for comprehensive liberalisation.

The EU's Carbon Border Adjustment Mechanism (CBAM) also remains a significant point of friction. While Brussels frames the mechanism as a tool to align imports with its climate objectives, New Delhi has expressed concern over its potential obstructive impact on Indian exporters, particularly in energy-intensive sectors.

Furthermore, negotiations on services trade, intellectual property and regulatory alignment remain ongoing, with differences persisting over the scope and enforcement of intellectual property provisions.

Ultimately, the agreement will require the EU to balance its economic priorities with commitments to sustainability and regulatory standards. Both sides have nevertheless stressed the importance of delivering a fair and balanced outcome. These considerations continue to shape the final compromises currently under negotiation.

What EU will gain

For the EU, the prospective benefits of an FTA with India are both economic and strategic. On the economic front, the agreement would deepen trade and investment ties, expanding opportunities for European firms in one of the world's fastest-growing major economies.

Beyond tariff reductions, the FTA would facilitate stronger investment flows and supply-chain integration, offering European industry a credible alternative market and production base as it seeks to reduce exposure to concentrated supply chains and geopolitical risk.

Strategically, the agreement would strengthen the EU's footprint in the Indo-Pacific and anchor relations with a partner that broadly shares Europe's commitment to democracy and a rules-based international order.

Finalising the FTA with India offers Brussels a means of embedding long-term stability and openness into its external economic strategy, particularly as it seeks to diversify key economic partnerships. Set to be one of the EU's largest trade agreements to date, the conclusion of the deal would signal a durable recalibration of Europe's global economic posture.