India, EU likely to seal long-pending free trade deal on Jan 27 | India News

India and the European Union are expected to announce the outcome of talks on a long-pending free trade agreement on January 27, a deal that leaders of both sides have described as the “mother of all agreements”.

According to reports, the agreement, which has been negotiated for more than a decade, is seen as an important step in deepening economic ties between the two regions at a time of increasing global trade uncertainty.

A broad-based free trade agreement could significantly improve India’s trade position with the European Union, according to a Jan. 25 research note from Emkay Global.

The deal could increase India’s trade surplus with the EU by more than $50 billion by FY31. It could also provide a strong impetus to India’s export growth by increasing the EU’s share in India’s total exports to around 22-23 per cent compared to 17.3 per cent in FY25.

Although India currently accounts for only 0.8 percent of the EU’s export market, the deal is becoming increasingly important for Europe as well.

Europe’s trade balance with India has changed sharply in recent years; The EU went from a $3 billion trade surplus in FY2019 to a $15 billion trade deficit in FY25.

The deal also fits into broader European efforts to reduce its dependence on China and diversify global supply chains. The expected gains from the agreement are likely to result from a gradual change in the nature of India’s exports to the EU.

Higher value products such as electronics, machinery and chemicals are expected to take a larger share, moving beyond traditional labour-intensive goods.

This is particularly important as the EU’s share of India’s exports has fallen to 16.8 per cent so far in FY26.

Emkay Global noted that Europe’s reduced dependence on Russian energy and efforts to source more goods from outside China have already increased demand for Indian products such as refined fuels, electronics and chemicals.

A free trade agreement could further strengthen these trends by making trade cheaper and more predictable.

Total trade in goods between India and the European Union in FY25 exceeded $136 billion. India’s imports from the EU amounted to 60.7 billion dollars, and its exports to the bloc amounted to 75.9 billion dollars.

Trade experts say the trade structure between the two sides is largely complementary rather than competitive.

Ajay Srivastava, founder of the Global Trade Research Initiative, said India’s exports to the EU, including smartphones, clothes, shoes, tyres, pharmaceuticals, auto parts, refined fuels and cut diamonds, have mostly replaced imports that Europe had previously sourced from other countries.

Many of these manufacturing activities had already been moved abroad by European companies years ago.

At the same time, EU exports to India include high-tech machinery, aircraft, basic electronic components, chemicals, advanced medical devices and metal scrap.

These inputs support factories, recycling units and MSME clusters in India, helping to increase productivity and export competitiveness.

The proposed deal is expected to reduce or eliminate tariffs on products in India’s labour-intensive sectors, as well as give European companies better access to the Indian market for high-end cars and wines.

Since India and the EU specialize in different segments of the economy, lowering tariffs will mainly reduce costs rather than displacing industries, Srivastava said.