In a recent development, Prime Minister Narendra Modi and European Commission President Ursula von der Leyen have reaffirmed their commitment to finalize the much-anticipated Free Trade Agreement (FTA) between India and the European Union (EU) by the end of the year. This commitment was reiterated during a phone call where they discussed strengthening the strategic partnership between India and the EU and addressing global issues, including the conflict in Ukraine.

The EU sees India as a key economic and diplomatic partner, viewing India as a fellow upholder of the rules-based multilateral order. The EU hopes to benefit from India's expected rise to become the world's third-largest economy by 2030. This has led the European Commission to propose a new strategic agenda to elevate bilateral relations with India. This agenda aims to deepen, broaden, and better coordinate cooperation, enhance prosperity and security, and tackle global challenges.

The FTA aims to cover 23 policy areas, including trade in goods and services, investment, intellectual property rights, and sustainable development. India is seeking preferential access for its labor-intensive exports like textiles, apparel, and leather, as well as products like machinery, chemicals, pharmaceuticals, and metals. The EU, on the other hand, is seeking greater access to the Indian market for its automotive sector, wines and spirits, and agricultural products like meat and poultry.

Negotiations for the India-EU FTA were relaunched in June 2022. Faced with trade uncertainties, both sides have sought accelerated efforts to foster new alliances. The 13th round of negotiations recently concluded in New Delhi, and the 14th round is scheduled to be held in Brussels from October 6-10.

Despite the shared commitment, some challenges and sticking points remain. These include tariffs on automobiles, agriculture, and dairy products, as well as market access for Indian pharmaceuticals, textiles, and services. India is also seeking exemptions from the carbon tax imposed through the Carbon Border Adjustment Mechanism (CBAM) for its steel and aluminum exports.

The EU is India's biggest trading partner, with bilateral merchandise trade at $136.2 billion. In 2024-25, exports from India stood at $75.8 billion, while imports were $60.6 billion. Both sides also have a robust services trade, which stood at $70 billion in 2023.

The India-EU FTA is not just about trade; it's about high-value-added investment that will create additional jobs. The EU Trade Commissioner has emphasized that the EU-India relationship extends beyond trade to encompass investments that will generate employment opportunities.

In addition to trade, the EU is also looking to strengthen ties with India in defence, technology. The new strategic agenda aims to deepen industrial cooperation in the defence sector and strengthen joint economic security. The EU also intends to engage with India on curtailing Russia's military and preventing the circumvention of EU sanctions. The EU plans to deepen cooperation with India in fields such as defence, technology and trade despite tensions over New Delhi's closer ties to Moscow.

The commitment to conclude the India-EU FTA by the end of the year reflects the growing strategic importance of the relationship between the two sides. A successful FTA would not only boost trade and investment but also strengthen cooperation on a range of global issues.