New Delhi, Jan 14 (IANS) India and the European Union are in the final stages of negotiating a landmark Free Trade Agreement (FTA), which could reshape India’s trade landscape with its largest partner for goods.

Some reports have tied German Chancellor Friedrich Merz’s just-concluded India visit to the ongoing India-EU talks. His trip is being seen as having underscored Germany’s push to fast-track the deal, highlighting trade, investment, and green technology as priority areas.

Merz’s January 12–13 visit came even as talks entered a “decisive yet difficult” phase, with hurdles around carbon border adjustment mechanisms (CBAM), market access, and regulatory standards.

It was his first official visit to Asia as Chancellor, signalling Berlin’s intent to elevate India as a strategic partner in Europe’s Indo-Pacific outreach.

India-EU negotiations began in 2007 but stalled over disagreements on tariffs, intellectual property, and market access.

Talks resumed in 2022 with renewed urgency amid global supply chain disruptions and geopolitical tensions.

The FTA is expected to eliminate or reduce tariffs, expand market access, and deepen investment ties.

Following high tariffs imposed by the US disrupting trade, the FTA will help Indian exporters diversify shipments, also reducing dependence on China.

While the deal promises significant opportunities in exports, investment, and supply chain diversification, it also raises concerns about regulatory challenges, market access, and domestic industry protection.

Once signed, this would be India’s 19th trade agreement, following recent pacts with New Zealand, Australia, the UAE, and Mauritius, among others.

Incidentally, the EU is India’s largest trading partner for goods, accounting for nearly 11 per cent of India’s total trade. In 2024-25, India’s exports were worth $75.85 billion and imports $60.68 billion.

The EU market accounts for about 17 per cent of India’s total exports, and its own exports to India comprise nine per cent of the total.

The deal will likely offer Indian exporters access to 450 million consumers to EU’s markets with high purchasing power. Sectors like textiles, leather, pharmaceuticals, and IT services are expected to benefit from tariff reductions.

India’s Commerce Minister Piyush Goyal stated that the FTA would “help Indian exporters diversify markets at a time when high US tariffs and geopolitical tensions are reshaping global supply chains”.

The EU is already a major investor in India. The FTA could encourage greater FDI inflows, particularly in green technology, renewable energy, and advanced manufacturing.

With global trade disruptions, India could position itself as an alternative manufacturing hub for European companies, supporting Prime Minister Narendra Modi’s “Make in India” initiative and long-term industrial growth.

A section of Indian farmers and small manufacturers, however, have been wary of being outcompeted by subsidised European products. Dairy and agriculture are particularly sensitive sectors, with Indian negotiators resisting EU demands for greater access, insisting on stronger safeguards.

Meanwhile, the EU has stringent environmental and labour standards, leading to some Indian exporters worrying over a struggle to comply, raising costs.

Also, the EU seeks stronger intellectual property protections, which could impact India’s generic pharmaceutical industry. Additionally, concerns also exist around data privacy rules that may restrict Indian IT firms operating in Europe.

Indian negotiators are trying to smooth these rough edges. Following the restrictions imposed by the US and the UK, New Delhi hopes for greater access for its IT and skilled professionals, while the EU remains cautious about liberalising labour mobility. Overall, the final agreement can become a cornerstone of India’s global trade architecture, strengthening its position in a multipolar world.

–IANS

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