India-EU Trade Agreement Poised for Breakthrough After Two Decades of Negotiations
After nearly two decades of intermittent discussions, India and the European Union are on the cusp of finalizing a comprehensive trade and investment agreement. This potential deal, often dubbed the "mother of all deals" by Indian Commerce Minister Piyush Goyal, marks a decisive phase in bilateral relations, coinciding with the 16th India-EU Summit and the visit of European Commission President Ursula von der Leyen. The negotiations, which began in 2007, have spanned 15 rounds across Brussels and New Delhi, stalling in 2013 due to disagreements over market access, labor standards, and other critical factors.
Renewed Urgency in a Fragmented Global Economy
By 2021, the global landscape underwent significant transformations, prompting a resumption of talks. Supply-chain realignments, pandemic-induced disruptions, and geopolitical uncertainties have injected fresh urgency into the discussions. In a world where tariffs are increasingly weaponized and economic blocs fragment, both India and the EU recognize the strategic importance of this agreement. It offers predictability and stability in a market encompassing nearly two billion people, helping India diversify away from over-reliance on the US and China, while providing the EU with a strategic foothold in the Indo-Pacific region.
Key Trade Figures and Sectoral Focus
India and the EU are major trade partners, with bilateral goods trade valued at $136 billion in 2024-25. Indian exports to the EU stood at $76 billion, dominated by mineral products (nearly 20%), machinery (around 15%), and a mix of chemicals and textiles (around 6% each). Imports from the EU amounted to $60 billion. New Delhi is pushing for tariff reductions in labor-intensive sectors such as textiles, leather, footwear, and jewelry, where EU duties range from 8 to 16%. Conversely, the EU aims to lower India's high tariffs on wines, spirits, and automobiles, which can reach 150-200%, issues that previously derailed negotiations.
Sensitive Areas and Remaining Challenges
Reports indicate that an agreement has been reached on roughly 20 of the 24 negotiating chapters, with the remaining ones concentrated in sensitive areas. These include agriculture, automobiles, steel, and data governance. India maintains red lines on agriculture and dairy, reflecting concerns over farmer livelihoods and food security. Data governance remains contentious, with India seeking recognition as a "data-secure" country to facilitate cross-border data flows, while the EU presses for stronger privacy frameworks aligned with its standards.
Sustainability and labor provisions have also emerged as critical points. The EU's Carbon Border Adjustment Mechanism (CBAM) poses a non-tariff barrier for Indian exporters, particularly small and medium enterprises (SMEs), due to challenges in awareness and compliance. Similarly, the EU Deforestation Regulation could impact India's leather and meat exports if traceability requirements are unmet. From the European perspective, India's Quality Control Orders and Bureau of Indian Standards certification requirements hinder access for goods like automotive components and electronics, necessitating greater regulatory transparency and mutual recognition.
Implementation and Future Prospects
The success of such agreements often hinges on domestic implementation rather than negotiations alone. For India, realizing the benefits requires an enabling manufacturing ecosystem through reforms in ease of doing business, regulatory simplification, and logistics connectivity. Export competitiveness will depend on diversifying the product basket and aligning with European quality and sustainability standards. The India-Middle East-Europe Economic Corridor (IMEC) could serve as a strategic enabler, enhancing multimodal connectivity between the markets.
Beyond goods, expanded access to IT and services could help India diversify workforce mobility away from the US. If concluded and ratified, this trade agreement could set a template for future strategic arrangements in a multipolar world, potentially strengthening India's position in eventual negotiations with the US. After two decades of hesitation, the convergence of strategic interests suggests that the timing may finally be right for this landmark deal.
