India is moving swiftly to conclude a long-delayed free trade agreement (FTA) with the European Union, even as geopolitical tensions and international economic pressures mount. Commerce Minister Piyush Goyal confirmed that negotiations have progressed significantly, with nearly two-thirds of the chapters already finalised. The timing of the push aligns with rising concerns in Washington over India’s continued imports of Russian oil, prompting fresh calls from former U.S. President Donald Trump for steep tariffs against India and China.
The renewed urgency in New Delhi’s diplomatic engagements reflects a strategic balancing act—deepening trade and political cooperation with the EU while resisting external pressure to decouple from its energy ties with Moscow.
Major Breakthroughs in EU-India FTA Talks
Speaking to media on Tuesday, Minister Goyal said that between 60% to 65% of the FTA chapters have already been agreed upon, and both sides are optimistic about substantial progress by mid-September. A high-level EU delegation, led by Trade Commissioner Maros Sefcovic and Agriculture Commissioner Christophe Hansen, is scheduled to arrive in New Delhi for advanced discussions on September 12.
“We are now at a point where a comprehensive conclusion is within sight,” Goyal said, underlining India’s determination to finalise the deal by the end of 2025.
The FTA, once concluded, is expected to be one of the most expansive trade deals in the world, covering goods, services, investments, sustainable development, digital trade, and intellectual property rights. The agreement is expected to give Indian exporters better access to European markets while providing EU firms with improved investment and business conditions in India.
The negotiations, which resumed in 2021 after being dormant for nearly a decade, are also seen as part of India’s broader strategy to strengthen economic partnerships beyond China and the United States.
Geopolitical Crosswinds: Trump’s Tariff Call and the Russia Factor
Parallel to the progress in EU talks, tensions with the United States are flaring, particularly around India’s continued oil imports from Russia. Former U.S. President Donald Trump has urged the EU to impose tariffs of up to 100% on both India and China over their energy transactions with Moscow. His push follows recent U.S. actions that slapped a 50% tariff on Indian goods, including a 25% penalty directly linked to India’s dealings with Russia.
The pressure from Washington comes amid a dramatic escalation in the Ukraine conflict. Recent developments include Russian drones breaching Polish airspace and a direct missile strike on Kyiv’s administrative center—moves that have rattled NATO and further strained the West’s already fragile ties with the Kremlin.
Trump’s demands coincide with remarks by U.S. Treasury Secretary Scott Bessent, who indicated that Washington seeks more coordinated economic sanctions targeting Russia’s energy revenues. He also stressed that European cooperation is essential for the strategy to succeed.
Despite these mounting pressures, Indian officials have made it clear that energy security remains a non-negotiable priority. India, the world’s third-largest energy consumer, maintains that it will continue buying crude oil from any source offering the most competitive pricing.
Maritime Cooperation and Strategic Engagements with the EU
The momentum in trade talks has been complemented by enhanced military and strategic cooperation between India and the EU. Earlier this week, the two sides conducted their first joint naval exercise in the Indian Ocean, signaling growing alignment on maritime security.
In addition to trade and defense, discussions are also focusing on foreign policy and security cooperation. A 28-member delegation of the EU’s Political and Security Committee (PSC) is currently in Delhi, engaging with Indian counterparts on broader geopolitical challenges, including India’s potential role as a mediator in the ongoing Ukraine war.
The PSC’s presence in India reflects the EU’s interest in developing a long-term strategic partnership, extending beyond commerce and into areas such as cybersecurity, defense technology, and global governance.
Trade, Not Tension: The EU-India Economic Equation
India’s relationship with the EU has steadily deepened over the past decade. The bloc is India’s largest trading partner, with bilateral trade in goods reaching $135 billion in 2022–23, nearly double the volume from a decade earlier. Around 6,000 EU-based companies operate in India, spanning sectors from automotive and chemicals to digital services and pharmaceuticals.
The FTA, once in place, is expected to accelerate this growth further, particularly in the green energy and technology sectors. Both India and the EU have ambitious climate commitments, and the trade pact is likely to include robust provisions on sustainability and carbon neutrality.
Officials are also exploring avenues to make the FTA digitally forward-looking, by incorporating norms on data protection, AI governance, and e-commerce regulations. These elements are seen as critical to ensuring the agreement remains relevant in a rapidly evolving global economy.
India’s Broader Trade Strategy: Diversifying Beyond Traditional Partners
India’s aggressive pursuit of trade deals in recent years is part of a broader economic realignment. Earlier this year, India concluded a $100 billion FTA with the European Free Trade Association (EFTA) after 16 years of negotiations. That agreement, involving Switzerland, Norway, Iceland, and Liechtenstein, was seen as a signal of India’s commitment to forging deeper links with developed economies.
The India-UK FTA, which came into effect in July, further adds to this expanding trade web. India is also in talks with Canada, Australia, and members of the Gulf Cooperation Council (GCC) for similar deals.
Unlike past decades where trade policy was reactive, India today is strategically using trade agreements as a tool for economic diplomacy—balancing its energy needs, geopolitical interests, and industrial ambitions.
Challenges Ahead: Digital Taxation, Market Access, and Sustainability
Despite the progress, several contentious issues still need resolution before the EU-India FTA can be finalised.
Among them is digital taxation, with the EU seeking clarity on India’s equalisation levy on digital services. Market access for European agricultural products, especially dairy, remains another sticking point, given India’s sensitivities around its farming sector.
There are also negotiations over rules of origin and dispute resolution mechanisms, which are technically complex and require alignment across legal systems. Sustainability standards, particularly around carbon border taxes, are another area where perspectives differ, though both sides have committed to finding common ground.
While both sides are optimistic, trade experts warn that finalising the FTA will require political will at the highest levels, particularly in an increasingly protectionist global environment.
India’s drive to conclude its free trade agreement with the EU is a strategic move to expand its global trade footprint, navigate rising geopolitical challenges, and secure economic growth through diversification. Even as tensions with the U.S. escalate over its energy ties with Russia, India remains firm in pursuing its national interests without compromising on international partnerships.
With the majority of the FTA framework already in place and political momentum building, the coming weeks will be crucial. If successfully concluded, the deal could reshape not just India-EU economic relations but also signal a new era of trade diplomacy amid a shifting global order.
