As the world grapples with evolving geopolitical and economic uncertainties, India and the European Union (EU) are exploring the possibility of negotiating their long-awaited Free Trade Agreement (FTA) in phases. This move is seen as a strategic shift to expedite progress in areas of consensus and leave complex issues for later rounds.

Negotiations Moving Towards a Tranche-Based Structure

According to a senior official involved in the talks, India is considering following a two-phase negotiation model—similar to the one used for its FTA with Australia. “FTA in tranches are being explored with the EU,” the official confirmed.

This approach is expected to help both sides reach early agreements on less contentious issues while providing additional time to work through more sensitive matters such as tariff structures and intellectual property rights.

The 10th round of negotiations was recently concluded in Brussels, with the next round scheduled for May 2025 in India. The momentum has picked up notably following the visit of European Commission President Ursula von der Leyen and the EU College of Commissioners, indicating renewed political will to seal the deal.

Why This Deal Matters Now

Trade analysts believe that the India-EU FTA is crucial in the wake of aggressive tariff policies recently implemented by global powers like the United States. On April 3, US President Donald Trump announced sweeping tariffs, escalating trade tensions globally.

In this context, India and the EU are looking to deepen their economic and strategic partnership, providing an alternative and more stable trade environment. Both sides resumed formal negotiations in June 2022, ending an 8-year stalemate that began in 2013 due to differences over market access and regulatory concerns.

In a meeting on February 28, Prime Minister Narendra Modi and President von der Leyen agreed to finalize the FTA by the end of this year—a milestone that is now within reach.

Comprehensive Scope of the India-EU FTA

The agreement, once finalized, will be far-reaching and comprehensive, covering 23 distinct policy chapters, including:

• Trade in Goods

• Trade in Services

• Investment Protection

• Sanitary and Phytosanitary Measures

• Technical Barriers to Trade

• Customs and Trade Facilitation

• Dispute Settlement

• Intellectual Property Rights (IPR)

• Geographical Indications (GIs)

• Sustainable Development, among others.

The EU has been pressing India for significant duty cuts in sectors such as automobiles, medical devices, wines, and spirits, and has sought a stronger intellectual property regime to protect European innovation and brand assets.

On the other hand, India expects greater access for its pharmaceuticals, textiles, petroleum products, electrical machinery, and ready-made garments, which currently face high tariffs and regulatory hurdles in the EU.

Current Trade Snapshot: India-EU

The EU has emerged as India’s largest trading partner in goods, with bilateral trade touching USD 137.41 billion in FY 2023-24. Of this, exports stood at USD 75.92 billion while imports were USD 61.48 billion.

The EU accounts for about 17% of India’s total exports, making it a critical market for Indian businesses. On the flip side, India is the EU’s 10th largest trading partner, contributing to 9% of the EU's global exports.

In addition to goods, the services trade between India and the EU was valued at USD 51.45 billion in 2023, further underlining the potential of a comprehensive agreement.

Parallel Trade Talks with EFTA Progressing

India is not only focusing on the EU FTA but also making substantial progress with the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway, and Switzerland.

The two sides signed the Trade and Economic Partnership Agreement (TEPA) on March 10, 2024, marking a significant leap forward in Indo-European trade relations.

Under this pact, India has secured an investment commitment of USD 100 billion over 15 years from the EFTA bloc. In return, India will allow duty reductions or eliminations on products such as Swiss watches, chocolates, and polished diamonds, making them more affordable for Indian consumers.

The implementation of this agreement is now awaiting ratification by the parliaments of the four EFTA nations. Notably, Switzerland requires a national referendum to approve the deal—another democratic check in the process.

Looking Ahead: Opportunities and Challenges

With global protectionism on the rise, India’s dual-track negotiations with both the EU and EFTA reflect a pragmatic and diversified approach to trade diplomacy. The phased FTA strategy allows for faster implementation in critical sectors, while giving both parties breathing room to address sensitive concerns gradually.

If concluded successfully, these agreements will help:

• Enhance India’s competitiveness in European markets

• Attract long-term investments from the EU and EFTA

• Boost India’s service and manufacturing exports

• Ensure regulatory cooperation and mutual recognition of standards

• Strengthen India’s position in global value chains

However, the road to implementation is not without obstacles. The EU remains firm on issues such as IPR, sustainability commitments, and carbon taxes, while India is cautious about exposing its MSMEs and agriculture sector to sudden global competition.

Conclusion

The ongoing India-EU and India-EFTA trade negotiations have entered a crucial phase. By exploring phased implementation and maintaining open dialogue, India is positioning itself to secure win-win trade partnerships that can withstand global economic shocks.

Both the political commitment and economic rationale are aligning toward the finalization of these FTAs, offering significant potential for Indian exporters, investors, and consumers in the years ahead.

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