New Delhi: In a bold move amid escalating trade frictions with the United States, India is accelerating its alternative strategy, gearing up for a landmark Free Trade Agreement (FTA) with the European Union that could be sealed as early as next week.
Dubbed the ‘mother of all deals’ by European Commission President Ursula von der Leyen, this pact promises to link nearly two billion people and encompass a quarter of the world’s GDP, reshaping global commerce while delivering a subtle setback to both China and the US.
Negotiations between India and the EU, which have been underway for years, are now in their final lap. Sources indicate that the agreement could be unveiled during the India-EU Summit scheduled for January 27, 2026. Once inked, the FTA will focus on goods, services, and trade regulations, marking India’s ninth such bilateral arrangement. However, it will require ratification by the EU Council and the European Parliament, a process that might stretch over a year or more.
A key sticking point in the talks has been tariff reductions. The EU is pushing for the elimination of duties on over 95 per cent of goods, whereas India is advocating for a more cautious approach, capping it at around 90 per cent. Crucially, sensitive sectors like agriculture and dairy have been excluded from the deal to safeguard domestic interests.
The potential rewards for India are immense. Bilateral trade between the two sides stood at approximately $136.5 billion in 2024-25, with Indian exports clocking $75.8 billion and imports at $60.7 billion. Experts predict that the FTA could propel this figure to between $200 billion and $250 billion in the coming years. With the EU boasting a population of over 450 million and an economy valued at more than $20 trillion – making it the globe’s largest trade bloc – Indian businesses stand to gain tariff-free or low-duty access to this lucrative market.
Indian exports are expected to skyrocket across multiple sectors. Textiles, ready-made garments, pharmaceuticals, leather goods, footwear, gems and jewellery, IT services, and even defence equipment could see a massive uptick. Currently, the EU imposes an average tariff of 3.8 per cent on imports, rising to 10 per cent for items like apparel and ornaments. Slashing these barriers would enhance the competitiveness of Indian products, opening doors wider for professional services and manufacturing.
On the flip side, India would benefit from cheaper imports of raw materials from Europe, enabling cost-effective domestic production. This could spur large-scale investments, the establishment of new factories, and smoother technology transfers, fostering job creation and industrial growth.
Beyond the numbers, the deal holds strategic significance. It positions Europe as a dependable supply chain alternative for India, helping to wean off heavy reliance on China for critical inputs. New funding avenues could emerge for emerging fields like electric vehicles, renewable energy, and green hydrogen, aligning with India’s sustainability goals.
The implications extend to global powers. For China, this shift means diminished influence in India’s import basket, as Europe steps in as a more reliable partner. Meanwhile, the US might feel the pinch indirectly. Europe, facing slower growth in America and ongoing pressures from Washington, is increasingly viewing India’s rapidly expanding economy as an attractive investment destination. This could divert European capital towards Indian startups and infrastructure, bolstering India’s position as the world’s fastest-growing major economy.
As India pivots towards this ‘Plan-B’ in the face of US trade uncertainties, the EU FTA emerges not just as a commercial milestone but as a geopolitical masterstroke. It underscores New Delhi’s intent to diversify partnerships, secure economic resilience, and emerge stronger on the world stage. With the summit just days away, all eyes are on whether this ambitious accord will indeed deliver the promised big bang.