New Delhi: The India-European Union (EU) Free Trade Agreement (FTA) is expected to be signed on January 27, marking a significant milestone in trade relations between the two economies. Often described as the ‘mother of all deals,’ this agreement is projected to increase India’s trade surplus with the EU to over 51 billion dollars by the financial year 2031.
Negotiations between India and the EU on the FTA began nearly a decade ago. However, amid growing global trade uncertainties, both sides have accelerated talks to finalise the pact. According to a research report released by MK Global, a comprehensive free trade deal with the EU could substantially strengthen India’s trade position.
The report highlights that by 2031, India’s trade surplus with the EU could exceed 50 billion dollars, with the EU’s share in India’s total exports rising from 17.3 percent in financial year 2025 to around 22-23 percent. This growth is expected to provide a major boost to India’s export sector.
Currently, India’s share in the EU’s import market remains low at just 0.8 percent. Nevertheless, the agreement is becoming increasingly important for Europe as well, given recent shifts in trade balances. In the financial year 2019, the EU had a trade surplus of 3 billion dollars with India, but by 2025, this shifted to a 15 billion dollar trade deficit in favour of India.
EU’s Strategy to Diversify Supply Chains
The FTA aligns with Europe’s broader strategy to reduce dependence on China and diversify global supply chains. It promises expanded market access for India’s labour-intensive industries such as textiles and footwear, as well as sectors like electronics, machinery, and chemicals.
In the financial year 2025, total trade between India and the EU amounted to 136 billion dollars, with India importing goods worth 60.7 billion dollars from the EU and exporting 75.9 billion dollars to the European market.
Impact on Key Sectors and Trade Dynamics
Ajay Srivastava, founder of Global Trade Research Initiative, noted that Indian exports to the EU include smartphones, garments, footwear, tyres, pharmaceuticals, auto parts, processed fuels, and diamonds. Many of these goods have replaced imports that the EU previously sourced from other countries, reflecting a shift in manufacturing locations by European companies over the years.
Conversely, imports from the EU to India mainly consist of high-end machinery, aircraft, key electronic components, chemicals, advanced medical equipment, and metal scrap. These imports support Indian factories, recycling units, and small and medium enterprises, enhancing productivity and export competitiveness.
Benefits for Labour-Intensive and High-End Markets
The proposed agreement is expected to reduce or eliminate tariffs on products from India’s labour-intensive sectors, while providing European companies improved access to the Indian market for premium automobiles and alcoholic beverages.
This landmark FTA signals a new era in India-EU economic relations, promising mutual benefits and stronger trade ties in the years ahead.
My name is Bhupendra Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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