Janice R. Andrews
New Delhi, March 1, 2025 – India is set to finalize a comprehensive Free Trade Agreement (FTA) with the European Union by the end of the year, Prime Minister Narendra Modi announced on Friday after high-level discussions with European Commission President Ursula von der Leyen in New Delhi. The agreement, aimed at boosting trade relations, is expected to be mutually beneficial and strengthen economic ties between the two global economic powerhouses.
“We have asked our teams to work out a mutually beneficial bilateral free trade agreement by the end of this year,” Modi stated, signaling a major breakthrough in negotiations that have been ongoing for several years.
EU Strengthens Economic Ties with India
Von der Leyen, who is on a two-day visit to India with a delegation of commissioners, expressed optimism about the progress made in trade discussions. She emphasized that the EU is expecting significant outcomes from trade negotiators and is committed to deepening trade relations with India.
The European Union is India’s largest trading partner, with trade in goods amounting to €124 billion ($130 billion) in 2023, making up over 12% of India’s total trade. However, despite its economic potential, India accounts for only 2.2% of the EU’s total trade, largely due to high tariffs and regulatory barriers.
Key Sectors in Focus
The proposed trade deal is expected to unlock new opportunities in critical sectors, including defense, agriculture, automobiles, and clean energy. The EU is particularly keen on lowering entry barriers for its products such as cars, spirits, and wines. On the other hand, India seeks increased European investments in urban infrastructure, renewable energy, and water management.
“We have tasked our teams to build on this momentum and finalize our FTA before the end of the year,” von der Leyen said. “We told them they should surprise us.”
India is also advocating for easier mobility for its skilled workforce in Europe, aiming for better visa regulations and increased employment opportunities for Indian professionals.
Geopolitical and Security Cooperation
Beyond trade, the EU and India are also working on strengthening their security and defense partnership. Von der Leyen announced that the EU is exploring a security and defense agreement with India, similar to its existing partnerships with Japan and South Korea.
“This will help us step up our work to counter common threats, whether on cross-border terrorism, maritime security threats, cyber-attacks, or attacks on critical infrastructure,” she said.
India is particularly interested in diversifying its defense procurement strategy and reducing reliance on traditional suppliers like Russia. Discussions also included expanding defense exchanges, naval exercises, and enhancing joint ventures in military hardware manufacturing.
India’s Strategy Amid Global Shifts
New Delhi’s economic strategy is also shaped by global shifts in supply chains, as businesses look to move away from China due to rising geopolitical tensions. India is positioning itself as a viable alternative by offering tax incentives, streamlined investment regulations, and improved infrastructure to attract European businesses.
Creating jobs for its vast workforce remains a key priority for India, and strengthening trade ties with the EU could provide a much-needed boost to employment generation.
Impact on Global Trade Dynamics
The India-EU free trade agreement could significantly alter global trade dynamics, providing European businesses greater access to one of the world’s fastest-growing markets while allowing India to expand its export footprint in Europe. Experts predict that once the deal is finalized, it could lead to a substantial increase in trade volumes, benefiting industries on both sides.
While the discussions also touched upon global security concerns, including the Russia-Ukraine war, India’s historical ties with Moscow continue to influence its foreign policy. However, both India and the EU reaffirmed their shared commitment to peace, stability, and economic prosperity in the Asia-Pacific region.
“This visit is unprecedented… and we have taken many important decisions on trade, technology, innovation, green growth, security, skilling, and mobility—a blueprint for the future has been prepared,” Modi concluded.
Looking Ahead
With the negotiations now on a fast track, businesses and investors from both India and the EU are eagerly anticipating the final agreement. If completed as planned, the FTA will be a landmark deal, fostering deeper economic collaboration and reinforcing India’s growing importance in global trade.
As the world watches, all eyes are on New Delhi and Brussels to see if they can deliver on their promise of a historic trade agreement by year-end.
