India and the European Union (EU) are positioned to conclude a landmark free trade agreement (FTA) as uncertainty regarding US trade policy under President Donald Trump intensifies.
European Council President Antonio Luis Santos da Costa and European Commission President Ursula von der Leyen are set to arrive in New Delhi as chief guests for India’s Republic Day celebrations next Monday, reports BBC.
While the visit involves significant ceremonial pomp, the primary focus for the leaders is the advancement of trade negotiations with Asia’s third-largest economy during a period of geopolitical volatility.
The invitation to the European leaders serves as a diplomatic signal that India is accelerating its global strategic and trade partnerships.
This comes as an impasse over Washington’s 50 per cent tariffs on Indian goods continues into the new year.
According to Chietigj Bajpaee of the Chatham House think-tank, the move demonstrates that Delhi’s foreign policy remains diversified and is not “beholden to the whims of the Trump administration”.
Negotiations for the pact, which have occurred intermittently for nearly 20 years, are reportedly reaching their conclusion.
Both von der Leyen and Indian Trade Minister Piyush Goyal have described the potential accord as the “mother of all deals”. Reports indicate an official announcement could be made as early as 27 January during a high-level summit.
Economic significance If successful, this will be India’s ninth FTA in four years, following agreements with the UK, Oman, and New Zealand. For Brussels, the deal follows recent pacts with the Mercosur bloc, Japan, South Korea, and Vietnam.
Analysts suggest both parties are seeking reliable partners to offset geopolitical risks – India aims to mitigate US tariff pressures, while the EU seeks to reduce its trade reliance on China.
India is currently the world’s fastest-growing major economy and is expected to surpass Japan this year with a GDP exceeding $4 trillion (£2.97tn). Ursula von der Leyen previously noted that a combined India-EU market would encompass two billion people and account for 25 per cent of global GDP.
For Delhi, the agreement is vital for restoring the Generalised System of Preferences (GSP), which was withdrawn by the EU in 2023.
Ajay Srivastava of the Global Trade Research Initiative (GTRI) noted that an FTA would regain lost market access and lower tariffs on essential exports, including pharmaceuticals, garments, steel, and machinery.
Potential obstacles Despite the momentum, several challenges remain –
• Sensitive Sectors: India intends to protect its dairy and agriculture industries while potentially phasing out tariffs on spirits, wine, and cars.
• Regulatory Standards: The EU is pushing for stricter patent norms, better data protection, and enhanced intellectual property safeguards.
• Carbon Taxation: The EU’s new Carbon Border Adjustment Mechanism (CBAM) is a significant point of contention. Srivastava warned that this “border charge” could harm MSMEs due to high compliance costs and complex reporting.
• Socio-Political Concerns: Pushback has occurred in Europe regarding India’s carbon emissions and human rights record.
The deal could accelerate a “decoupling” from unreliable trade partners and reduce vulnerability to the “weaponisation of supply chains”.
Sumedha Dasgupta of the Economist Intelligence Unit observed that political friction with the US since early 2026 has made EU leaders more receptive to the deal.
Furthermore, India’s decision to reduce Russian crude oil purchases from November 2025 is expected to facilitate the pact’s approval in the European Parliament.
