India-EU Free Trade Deal Set for Jan 27, Aims to Boost Exports by $50B

The agreement, which has been under negotiation for more than a decade, is seen as a major step in deepening economic ties between the two regions at a time of growing global trade uncertainty, as per reports.

According to a research note by Emkay Global dated January 25, a broad-based free trade agreement could significantly boost India's trade position with the European Union.

The deal may widen India's trade surplus with the EU by more than $50 billion by FY31. It could also raise the EU's share in India's total exports to around 22-23 percent, compared with 17.3 percent in FY25, providing a strong push to India's export growth.

While India currently accounts for only about 0.8 percent of the EU's export market, the agreement is becoming increasingly important for Europe as well.

Europe's trade balance with India has shifted sharply in recent years, with the EU moving from a trade surplus of $3 billion in FY19 to a trade deficit of $15 billion in FY25.

The deal also fits into Europe's broader efforts to reduce its dependence on China and diversify its global supply chains.

The expected gains from the agreement are likely to come from a gradual shift in the nature of India's exports to the EU.

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

This is particularly important as the EU's share in India's exports has slipped to 16.8 percent so far in FY26.

Emkay Global noted that Europe's reduced reliance on Russian energy and its push to source more goods 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.

In FY25, total goods trade between India and the European Union crossed $136 billion. India's imports from the EU stood at $60.7 billion, while its exports to the bloc were valued at $75.9 billion.

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

Ajay Srivastava, founder of the Global Trade Research Initiative, said Indian exports to the EU, including smartphones, garments, footwear, tyres, pharmaceuticals, auto parts, refined fuels and cut diamonds, mainly replace imports that Europe earlier sourced from other countries.

Many of these manufacturing activities were already offshored by European firms years ago.

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

These inputs support Indian factories, recycling units and MSME clusters, helping improve productivity and export competitiveness.

The proposed agreement is expected to lower or remove tariffs on products from India's labour-intensive sectors, while giving European companies better access to the Indian market for high-end cars and wines.

Srivastava said that because India and the EU specialise in different segments of the economy, reducing tariffs would mainly cut costs rather than displace industries.

- IANS