New Delhi is on the cusp of a game-changing free trade agreement with the European Union, potentially signed as early as January 27. Dubbed the ‘Mother of All Deals,’ this pact could propel India’s trade surplus with the EU to over $51 billion by fiscal year 2031, marking a pivotal shift in global trade dynamics.
Negotiations between these two economic powerhouses kicked off nearly a decade ago but gained urgency amid rising global trade uncertainties. A recent MK Global research report underscores how this comprehensive FTA will fortify India’s trade position with Europe. India’s share in EU exports, currently a modest 0.8%, stands to benefit immensely, with EU’s portion in India’s total exports projected to surge from 17.3% in FY2025 to 22-23%.
The transformation is already evident. In FY2019, the EU enjoyed a $3 billion surplus with India, but by FY2025, that flipped to a $15 billion deficit for Europe. This FTA aligns with Europe’s push to diversify supply chains and reduce reliance on China, opening doors for Indian labor-intensive sectors like textiles, footwear, electronics, machinery, and chemicals.
Last fiscal year, bilateral trade hit $136 billion, with India exporting $75.9 billion worth of goods to the EU against $60.7 billion in imports. Key Indian exports—smartphones, apparel, shoes, tires, pharmaceuticals, auto parts, processed fuels, and diamonds—are displacing goods Europe once sourced elsewhere, often from manufacturing shifted offshore by European firms themselves.
In return, India gains from EU exports of high-end machinery, aircraft, electronics components, chemicals, advanced medical devices, and metal scrap. These bolster Indian factories, recycling units, and SMEs, enhancing productivity and export competitiveness. The deal promises tariff cuts on labor-intensive Indian products and better market access for European luxury cars and wines in India.
As global trade reshapes, this FTA positions India as a vital partner in Europe’s strategic realignment, promising robust economic growth and deepened bilateral ties.