India is poised to significantly boost its trade and investment relationship with European countries, with a landmark agreement already in effect and ongoing negotiations promising further gains. A new trade agreement between India and the European Free Trade Association (EFTA) has officially commenced on October 1, 2025. This agreement is expected to generate $100 billion in investments and create 1 million direct jobs in India over the next 15 years. Separately, negotiations between India and the European Union (EU) are progressing, with both sides expressing optimism about finalizing a comprehensive Free Trade Agreement (FTA) by the end of 2025.
The India-EFTA Trade and Economic Partnership Agreement (TEPA) is a comprehensive accord with 14 chapters, covering areas such as market access for goods, trade facilitation, investment promotion, services, and intellectual property rights. This marks India's first FTA with four developed European nations: Switzerland, Norway, Iceland, and Liechtenstein. Under the agreement, the four EFTA states have committed to increasing foreign direct investment in India by $50 billion within the first 10 years, followed by an additional $50 billion over the next five years. These investments are targeted towards manufacturing, innovation, research, and service sectors.
To facilitate these investments, a dedicated India-EFTA Desk has been operational since February 2025, serving as a single-window platform. This desk focuses on key sectors including renewable energy, life sciences, engineering, and digital transformation, promoting joint ventures and SME collaborations. The TEPA agreement also includes tariff concessions. EFTA has offered tariff concessions on 92.2% of tariff lines, covering 99.6% of India's exports to EFTA. India has extended access on 82.7% of tariff lines, accounting for 95.3% of EFTA exports.
In addition to the EFTA agreement, India and the European Union are actively engaged in negotiations for a broad FTA. Officials from both sides have expressed confidence that a deal can be concluded by the end of 2025. The EU is already a significant trade partner for India, accounting for €120 billion in goods traded in 2024, representing 11.5% of India's total trade. Trade in services between the EU and India reached €59.7 billion in 2023. The EU's share of foreign direct investment stock in India reached €140.1 billion in 2023, making the EU a leading foreign investor in India. The FTA aims to remove barriers, help EU firms export more, open up services and public procurement markets, ensure protection of geographical indications, and pursue commitments to trade and sustainable development.
Both the India-EFTA TEPA and the potential India-EU FTA are expected to create significant opportunities for businesses and individuals in India. Farmers will gain better access to European markets and tariffs, while small businesses and startups will benefit from easier rules, skill development, and buyer-supplier support. Service providers will have access to easier digital services, professional mobility, and business presence abroad. These agreements are also expected to strengthen India's industrial and manufacturing sectors. The FTA with the EU could benefit export-oriented sectors, including pharmaceuticals, textiles, chemicals, and engineering goods, through reduced tariffs and improved market access. IT and services firms could gain from relaxed mobility norms, while automotive and component manufacturers may benefit from lower import duties and greater demand.
