The India-EU Free Trade Agreement is gaining urgency as global trade faces geopolitical and climate challenges.
Seen as more than a market-access pact, it aims to stabilise supply chains and redefine sustainability norms.
The deal can recalibrate geopolitics and offer strategic diversification amid unpredictable trade relations.
As global trade fractures under the weight of geopolitical conflict, tariff uncertainty and diverging climate regimes, the proposed India–European Union Free Trade Agreement (FTA) is emerging as far more than a conventional market-access pact.
Policymakers, diplomats and industry leaders increasingly see it as a strategic anchor — one that could recalibrate geopolitics, stabilise supply chains and redefine how sustainability norms shape international commerce.
That urgency was evident at a high-level dialogue titled “India–EU Summit: FTA and the Road Ahead”, jointly organised by the Chintan Research Foundation (CRF) and the Centre for Global India Insights. The discussion followed renewed political momentum around the India–EU FTA at the World Economic Forum in Davos and comes amid intensifying global trade fragmentation.
Together, India and the EU account for nearly two billion people and over a quarter of global GDP — an economic mass capable of influencing global trade norms if aligned. With multilateral institutions weakened and trade negotiations between major economies increasingly politicised, the India–EU FTA is being negotiated against a backdrop of deep geopolitical churn.
“This deal is being negotiated at a moment of deep uncertainty in the geoeconomic landscape,” said Shishir Priyadarshi, president of CRF. “In a world of trade disruption, rising tariffs and geopolitical tensions, an India–EU agreement sends a strong signal in favour of a rules-based international order.”
The strategic significance of the deal was reinforced by European Commission President Ursula von der Leyen, who said on January 21, 2026 at Davos that the EU was “on the cusp” of signing a trade agreement with India, giving the 27-member bloc a potential “first-mover advantage”.
Her remarks come as India’s trade talks with the United States remain uncertain and amid renewed tariff threats by the US, including a 50 per cent duty imposed on certain Indian goods since August last year.
According to Antonio Bartoli, Ambassador of Italy to India, such candid political signalling is unusual at this stage of negotiations. “Senior leaders usually avoid public optimism so close to the finish line. The fact that this was said openly suggests strong political backing on both sides,” he said.
For Europe, India represents a reliable democratic partner as economic ties with China are reassessed. For India, deeper integration with the EU offers strategic diversification at a time of unpredictable trade relations with the US.
“This is not just about hedging risk,” Bartoli added. “It is about choosing partners who believe in multilateralism and democratic values.”
While the agreement would link two of the world’s largest markets, experts cautioned that its true value lies beyond tariff liberalisation.
“For Indian industry, this is not a routine trade agreement,” said Rupa Dutta, distinguished fellow at CRF. “It is being seen as a structural enabler for long-term competitiveness rather than just a way to increase exports.”
Based on consultations across sectors, CRF found that industry priorities centre on regulatory stability, predictability and clarity, which are critical as global trade becomes increasingly compliance-driven.
“In today’s world, certainty is disappearing,” said Maree Luup, Ambassador of Estonia to India. “If this FTA delivers stability, it will be its biggest contribution.”
Industry leaders echoed this view, arguing that a concluded FTA would help diversify exports, deepen integration into global value chains and reassure investors about India’s long-term policy direction.
One of the most consequential aspects of the India–EU FTA is its intersection with sustainability and climate policy, particularly the European Union’s Carbon Border Adjustment Mechanism (CBAM), which came into force on January 1, 2026.
CBAM, which imposes carbon-related costs on imports of emissions-intensive goods, was initially perceived in India as a trade barrier. That perception, speakers said, is now evolving.
“The EU has a very strong emphasis on sustainability, and India needs to recognise that,” said Anil Wadhwa, former Ambassador of India to Italy. “CBAM is increasingly being understood as something that could make Indian industry more competitive globally, not less.”
Industry representatives acknowledged that compliance costs will rise but argued that FTA could unlock the technology transfer and investment needed to meet these standards.
“The expectation is that sustainability cannot be imposed without partnership,” said Dutta, who previously served as a principal economic adviser to the Indian government. “European investment will be critical in upgrading Indian manufacturing.”
Despite growing momentum, negotiations remain politically sensitive. India has drawn firm red lines around agriculture and dairy sectors that are closely tied to food security and rural livelihoods.
“India certainly has red lines around dairy and agriculture,” said Reuben Gauci, High Commissioner of Malta to India. “But based on available information, these sensitivities are being accepted by the European side.”
At the same time, India has shown greater flexibility on sustainability-linked trade norms, reflecting a broader shift in how climate policy is being integrated into trade strategy.
Among goods sectors, textiles stand out as a major potential beneficiary. Indian exporters currently face tariff disadvantages in the EU compared to countries such as Bangladesh and Vietnam, which enjoy near-zero duty access.
“If we have an FTA, India becomes far more competitive in textiles,” Dutta said, noting that the sector has also been hit by additional tariffs in the US market.
However, experts cautioned that gains in one sector may require trade-offs in others, including automobiles and wines and spirits, underscoring the political balancing act involved.
Smaller EU member states also see the agreement as transformative. Estonia’s ambassador highlighted opportunities in digital services, artificial intelligence and fintech.
“Estonia is the most digital country in the world, where 100 per cent of government services are online,” Luup said. “The FTA can open new opportunities in digital services, artificial intelligence and financial technology.”
India and Estonia already collaborate on digital identity and cybersecurity and these areas expected to gain further momentum under the agreement.
From Europe’s perspective, the FTA is part of a broader strategic partnership with India, framed around trust, predictability and resilience.
Bartoli described India as a “moral priority for Europe”, emphasising a peer-to-peer approach. “In an era of geopolitical turmoil and what I would call predictable unpredictability, Europe’s strength lies in being a reliable partner,” he said.
He also pointed to the India–Middle East–Europe Economic Corridor (IMEC) as an example of how trade, infrastructure and data flows could reshape connectivity between the Indo-Pacific and Europe.
Analysts said the India–EU FTA could become a template for balancing geopolitics, economic resilience and climate ambition.
“This is not just about increasing trade volumes,” said Pranav Kumar, vice president at the Reliance Group. “It is about shaping the rules of trade in an era where economics, geopolitics and sustainability are inseparable.”
If concluded, the agreement would complete India’s trade architecture with Europe, following recent deals with the United Kingdom and the European Free Trade Association.
As global trade becomes more fragmented, the India–EU FTA may ultimately be judged not just by export figures but by whether it helps anchor stability in an increasingly unstable world.