Indian Commerce Minister Rajesh Agrawal stated on December 15, 2025, that trade agreement negotiations with the European Union had entered their “most difficult” phase and that the parties were accelerating their efforts to reach a conclusion. In this context, it is noted that the biggest challenge in the negotiations is the Carbon Border Adjustment Mechanism (CBAM), which will come into force in the EU in 2026.
India argues that this mechanism could undermine the competitiveness of domestic industrial exporters, who are already under pressure due to tightening climate norms. In this context, New Delhi claims that the EU’s “unilateral” approach conflicts with the United Nations climate principles and therefore demands an exemption. It seems unlikely that the EU will abandon its carbon policy, which is central to its green industry strategy. As a solution, India is demanding the gradual adoption of CBAM, the provision of financial and technical support, and flexibility for small and medium-sized exporters.[i]
In June 2022, India and the EU resumed negotiations on a comprehensive free trade agreement and investment protection agreement after a hiatus of more than eight years. These negotiations had stalled in 2013 due to differences over the level of market opening. India’s bilateral trade in goods with the EU reached $136.53 billion in the 2024-25 period. This makes India the EU’s largest trading partner in goods. The EU market accounts for approximately 17% of India’s total exports, while the bloc’s exports to India account for 9% of its total overseas shipments.[ii]
EU Trade Commissioner Maroš Šefčovič has stated that they aim to sign a free trade agreement with India by the end of January 2026.[iii] Both sides hope to reach an agreement that could be announced during European Commission President Ursula von der Leyen’s visit to New Delhi in January. Indeed, despite disagreements over carbon taxes and relations with Russia, negotiations have entered their final stage. Brussels may overlook India’s ties with Moscow in order to secure a vital economic gain. Negotiations, which have been deadlocked for years due to procedural bottlenecks, are said to be gaining momentum following the latest talks in New Delhi. Both sides aim to secure their supply chains and reduce uncertainty at a time when the United States (US) is becoming more protectionist and global trade is becoming unstable.
Indian Commerce Minister Piyush Goyal met with European Trade Commissioner Maros Sefcovic in New Delhi on December 15, 2025, to renew efforts to conclude the long-running negotiations. The parties agreed to accelerate talks toward the year-end target. The main reason for this is seen as Washington’s decision this summer to increase tariffs on key trading partners, including India.[iv]
The EU has expressed concerns about India’s ties with Russia, particularly its continued purchases of discounted crude oil. However, this debate is not expected to have a significant negative impact on trade negotiations. Russian President Vladimir Putin’s visit to New Delhi in the first week of December 2025 was his first visit to India since 2022. Nevertheless, this was met with a lukewarm response from Europe. Therefore, the EU is expected to continue trade negotiations with India according to its own principles. Despite differences on Ukraine, ties between the EU and India have continued to develop. The EU-India Trade and Technology Council, established more than two years ago, which provides a strong cooperation platform for both sides on digitalization, security, and supply chain policies, is a case in point.
This long-awaited trade agreement from the EU perspective will open the door to one of the world’s fastest-growing markets. Brussels is asking New Delhi to reduce import duties on automobiles and medical equipment and to improve intellectual property protections. India, meanwhile, is pushing for better access to the information technology services, pharmaceutical, and textile sectors, as well as easier visa and permit processes for skilled workers. In this regard, the recently signed India-UK free trade agreement is cited as a potential model. A possible peace agreement reportedly being discussed between Russia and Ukraine could facilitate India’s balancing act between Moscow and the West.[v]
This agreement could further expand direct foreign investment opportunities for European companies seeking new growth markets. For India, this agreement will offer not only capital inflows but also access to advanced technologies. Low or zero customs duties will facilitate India’s exports of goods and services. India has actively accelerated negotiations to sign free trade agreements in recent years, signing agreements with the United Arab Emirates (UAE), Australia, and the United Kingdom. It is also conducting negotiations with the United States, Gulf countries, New Zealand, and the Eurasian Economic Union.
This agreement can also be seen as the EU’s “soft balancing” strategy against China. The EU is pursuing “de-risking strategy” without severing its economic ties with China. In this context, India stands out as an important economic, technological, and diplomatic alternative partner for the EU against China. The EU seeks to establish a distant but sustainable relationship with China without being fully dependent on the US. The free trade agreement with India will also contribute to the EU’s strategic autonomy in this regard. India, meanwhile, wishes to simultaneously maintain its defense and energy ties with Russia and its economic integration with the West. This agreement will further increase India’s integration with the West.
[i] “India, EU trying to narrow differences on trade pact; difficult issues on table: Commerce Secy”, Economic Times, https://economictimes.indiatimes.com/news/economy/foreign-trade/india-eu-trying-to-narrow-differences-on-trade-pact-difficult-issues-on-table-commerce-secy/articleshow/125981726.cms?from=mdr, (Date Accession: 18.12.2025).
[ii] Ibid.
[iii] “Trade talks with India to roll into the new year, EU trade chief says”, Politico, https://www.politico.eu/article/trade-talks-with-india-to-roll-into-the-new-year-eu-trade-chief-says/, (Date Accessed: 18.12.2025).
[iv] “India-EU trade pact nears finish line despite carbon tax dispute, Russia ties”, SCMP, https://www.scmp.com/week-asia/economics/article/3335872/india-eu-trade-pact-nears-finish-line-despite-carbon-tax-dispute-russia-ties?module=Economics&pgtype=section, (Date Accessed: 18.12.2025).
[v] Ibid.
