The 10th round of talks was held in Brussels in the mid-week of March to resolve the remaining disagreements over issues like automobiles, wines and spirits, dairy products, data security, public procurement, movement of professionals etc. before finalising the agreement. According to Ambassador Ackermann, this last round of talks after President Ursula’s India visit was extremely fruitful, thus making the “end-of-2025” deadline a reachable one. With the India-EU summit likely to be held later this year, the conclusion of the FTA will give a significant boost to India’s relation with Europe and enhance trade and investment.
The bilateral trade in goods and services amounted to approximately $190 billion in 2024, with India exporting $106 billion and importing over $82 billion. And since 2000, EU companies have invested approximately $118 billion in India, making up about 17 percent of total FDI inflows and surpassing the combined investments of the US, China, Japan and Russia. Even though nearly half of the inflows to India come via Mauritius and Singapore, serving as key investment channels for foreign firms, the fact is, around 6,000 EU companies operate in the country today. Reciprocally, Indian firms have also invested about $40 billion in the EU over the past two and half decades.
Broader India–EU
The FTA negotiations have been an integral part of the broader India–EU strategic partnership established in 2004. Following the recommendations of the High-Level Trade Group set up under the 2005 Joint Action Plan, negotiations began in 2007 under the Bilateral Trade and Investment Agreement (BTIA). The comprehensive agenda for negotiations included trade in goods and services, investment, public procurement, technical regulations, intellectual property rights, geographical indications, competition policy and dispute settlement. The robust Indian economy gave confidence to the European leadership and the two sides announced plans to finalise the deal by 2009 at the ninth India-EU Summit in France in 2008, attended by the then Indian Prime Minister Manmohan Singh.
However, the financial crises in some Eurozone economies slowed things down. Notwithstanding the hiccups, both sides set a new deadline of spring 2011 at the 2010 EU-India Summit held in Brussels. After multiple missed deadlines and 12 rounds of formal negotiations, talks were eventually frozen in 2013 due to a “mismatch in the level of ambitions.” Prime Minister Modi brought the EU back into India’s foreign policy agenda through the 2016 India-EU Summit and Agenda for Action 2020. But no progress could be made on bilateral trade agreement as exports stagnated and the manufacturing sector was struggling to take off. The situation came to such a pass that New Delhi had to terminate Bilateral Investment Treaties with a large number of countries, including 22 EU member states. The British exit from the EU and the COVID-19 pandemic added to the woes. Things began to look up in 2021 after Prime Minister Modi virtually met with all 27 EU leaders, along with the Presidents of the European Council and the European Commission. Apart from establishing a connectivity partnership, a key outcome of the virtual Summit was the agreement to restart trade negotiations. But instead of taking the BTIA route, India and the EU decided to pursue three parallel negotiations on stand-alone agreements covering trade, investment protection and geographical indications.
Amid US trade belligerence, the India-EU FTA presents a huge opportunity to both sides. For India, the EU continues to be a crucial partner in trade, technology, investment and energy transition. Given the interruptions in trade negotiations, which began in 2007, can a win-win deal be clinched? The current geopolitical landscape presents a golden opportunity to the two sides to reach a meaningful compromise.
Abandoning a decade of caution on trade deals, India has recently signed several agreements, including those with UAE, Australia, Mauritius and the European Free Trade Association (EFTA). This apart, momentum has been building on an India-UK free trade deal. Yes, there are hurdles on the way. India still faces challenges in some of its exports. Tariffs on agricultural goods, wines and automobiles as well as market access issues continue to bother New Delhi, seeking greater mobility for skilled professionals. EU’s Carbon Border Adjustment Mechanism (CBAM) and extra tariffs on Indian exports of steel, aluminium and cement under CBAM are now tied to the FTA discussions.
Conclusion
Moreover, the EU’s advocacy for TRIPS-plus provisions, stricter enforcement, data exclusivity and enhanced patent protection will push the Indian negotiators to the wall, thus compromising their ability to manoeuvre on the domestic front. India and the EU have launched the Trade and Technology Council (TTC), comprising three working groups: (1) strategic technologies, digital governance and digital connectivity (2) green and clean energy technologies (3) trade, investment and resilient value chains. Apart from India, the EU has a TTC with the US only. Hence, a strained trans-Atlantic tie triggered by the global tariff war initiated by Washington may bring India and the EU closer to each other. The growing convergence of interests in the Indo-Pacific and the favourable narratives surrounding the India-Middle East-Europe Economic Corridor (IMEC) will further strengthen the bridge. However, the EU may have to settle for a relatively shallow trade agreement rather than the comprehensive one it has long pursued, if it does not provide India the required elbow room to convince her domestic audience.