The economic bloc will gain access to India’s rapidly growing market, while the subcontinent is expected to benefit from increased investment and new export opportunities. The raw materials sector, in particular, could see long-term gains.
After nearly two decades of negotiations, India and the European Union announced on Tuesday that they have reached an agreement on a free trade deal. The next steps include approval by the EU Council and the European Parliament.
According to the EU, the planned free trade area would encompass around two billion people. Under the agreement, tariffs on more than 90 percent of EU goods exports to India are to be eliminated or significantly reduced. The EU estimates annual savings of up to four billion euros and expects its exports to India to double. Brussels describes the deal as the most extensive trade liberalization India has ever granted to a partner.
For India, one of the world’s fastest-growing economies, the agreement opens up new opportunities to expand exports in key sectors such as semiconductor manufacturing and green technologies. At the same time, investment inflows from the EU are anticipated to rise.
Search for New Trade Partners Amid Global Upheaval
The agreement comes amid rising geopolitical tensions and shifting global trade patterns. Established trade structures are under pressure, prompting major economies to seek new strategic partnerships. Both India and the EU have been affected by U.S. tariff policies, while also striving to reduce their dependence on China’s dominance in raw materials through increased domestic extraction and more diversified supply chains.
India is already a significant producer of several raw materials classified by the EU as critical, including barite and manganese. In other areas, such as rare earth elements, the country holds substantial reserves, ranking third globally, but these resources remain largely untapped. Processing capacities are even more limited. As a result, it is likely to take years before the EU can meaningfully diversify its supply of critical minerals through imports from India.
Another free trade agreement that could offer the EU comparable economic benefits and strengthen its access to raw materials is the long-discussed deal with the South American Mercosur bloc. Despite a recent breakthrough, however, negotiations have once again stalled.
Photo: iStock / daboost