India and the European Union are racing to finalize a long-awaited Free Trade Agreement by the end of 2025. In late February 2025, Prime Minister Modi and EU Commission President von der Leyen pledged to “conclude a free trade deal by the end of the year”. Commerce Minister Piyush Goyal echoed this, saying FTA talks are “pretty close” and 90% of market access issues are settled. Even External Affairs Minister Jaishankar confirmed on the record that a year-end deadline “is feasible” given the current progress.
It’s not hyperbole to call this moment historic: the EU is India’s largest trading partner in goods, with two-way trade (~$137.5 billion in 2023-24) having almost doubled over a decade. In 2024-25, India-EU merchandise trade reached roughly $136–$137 billion. This makes the EU by far the top export destination for Indian goods. Sectors poised to gain or lose from an FTA are enormous: from batteries and autos to pharmaceuticals and chemicals. Simply put, billions of dollars of trade and investment opportunities could be on the table.
Where are we in the talks?
Both sides are ironing out final details. According to Goyal, more than half the FTA chapters are agreed, and market access (actual tariff and quota changes) is nearly 90% done. The remaining sticking points are mostly non-tariff barriers – technical and regulatory roadblocks like safety standards and visa rules. For example, Indian goods like chillies, basmati rice, tea and dairy face strict EU limits, while Europeans press India to cut its 100–150% tariffs on cars, whiskey and wine. Negotiators are also hashing out services and rule-of-origin clauses. But overall, diplomatic signals are upbeat: India’s diplomats say the deal is “within sight” for 2025 completion.
Who benefits (or loses)?
Here are some key sectors and issues:
• Automobiles & Auto Parts: The EU has demanded that India slash its sky-high taxes (100–150%) on imported cars and whiskey. In return, India will seek tariff cuts for auto components or even finished electric vehicles. A successful deal could boost India’s fledgling EV and auto parts exports while exposing local auto makers to more competition.
• Agriculture & Food: India’s staples like spices (chillies), basmati rice, milk, poultry and fish currently face tough EU rules. The EU wants India to bring down its 35–60% tariffs on farm goods. A deal may ease some of these, giving Indian farmers better access to European markets. But India will watch EU’s heavily subsidized farm exports closely.
• Pharma & Chemicals: India’s generic drug makers hope for easier EU access (India is already a big pharma exporter). The EU, however, pressures India on patent rules (“evergreening”). Any compromise could affect billions in drug and chemical trade.
• Green Tech & Defense: European Commission President von der Leyen highlighted sectors like batteries, clean hydrogen, semiconductors and defence. These align with India’s investment push (PLI schemes) and climate goals. EU firms may invest more in Indian manufacturing of green tech, while India could import more EU tech.
• Services & IT: Indian IT and finance firms are keen on easier short-term visas for skilled workers; the EU is more restrictive on this. Meanwhile, India may agree to recognize some EU professional qualifications. These talks are sensitive but crucial for sectors like IT and finance.
A quick data snapshot: In FY2023-24, India exported $75.9 billion to the EU and imported $61.5 billion. EU companies have already invested over $117 billion in India. Much of that investment sits in auto plants, electronics, and financial services. If tariffs fall and barriers ease, these flows could accelerate.
What does all this mean for investors?
In the short term, a successful FTA would likely be bullish for export-oriented sectors. For example, auto parts suppliers, green tech companies, and pharmaceutical firms might see brighter prospects. Conversely, some Indian industries exposed to EU competition (like spirits or dairy) may face new challenges. Cheaper imports from Europe could also lower input costs for Indian manufacturers.
In the long run, deepening India-EU ties could strengthen India’s growth and diversification strategy. As EU Commission President von der Leyen noted, cooperation on trade, tech and investment is seen as a way to hedge against global uncertainty. For investors, the key takeaway is to watch sectors tied to EU trade. Battery makers, pharma exporters, IT firms with Europe clients, and “Make in India” manufacturers stand to gain if the pact is finalised by late 2025.
This content is for educational purposes only and does not constitute investment advice.