India, EU near major trade deal as farm sectors stay protected
Agriculture, dairy excluded as talks enter final stage
16 January 2026
2 minute read
By: India expects talks on a long-sought trade deal with the European Union to conclude this month, Trade Secretary Rajesh Agrawal said on Thursday, in what would be New Delhi's largest agreement as it seeks new markets amid US tariff pressures, reported Reuters.
The deal, under discussion for years, is seen as a chance for both sides to deepen economic ties and cut reliance on China and Russia. Bilateral trade between India and the EU totalled 120 billion euros ($140 billion) in 2024, making the bloc India's biggest trading partner.
Agrawal said the two sides were "very close" to finalising the pact and were exploring whether it could be wrapped up before leaders meet in New Delhi this month.
He said talks on a US trade pact were continuing and a deal would be reached when both sides were ready. Negotiations collapsed last year after a breakdown in communication between the two governments.
The president of the European Council, Antonio Costa, and European Commission President Ursula von der Leyen will visit India on January 25–27 and co-chair an India–EU summit on January 27, India's foreign ministry said.
The European Commission, which is negotiating on behalf of the EU's 27 members, also expressed cautious optimism in remarks to EU envoys late on Wednesday, according to sources familiar with the discussion.
The main sticking point is over cars and steel, they said. The EU wants India to cut sharply import duties on EU cars that can exceed 100%, while India is concerned that its steel exports to the EU will be limited by the EU's carbon border levy and safeguards lowering overall EU steel imports.
If concluded, the deal would open India's vast and heavily protected consumer market of more than 1.4 billion people to European goods and could reshape global trade flows as protectionism rises and a U.S.-India pact remains stalled.
Both sides have been pushing to close a broad agreement after von der Leyen and Indian Prime Minister Narendra Modi agreed to fast-track negotiations in an effort to close a deal in 2025. Talks, relaunched in 2022, gained momentum after US President Donald Trump imposed tariff hikes on trading partners including India.
Brussels has recently signed deals with Mexico and Indonesia and stepped up talks with India, while New Delhi has reached agreements with Britain, Oman and New Zealand. Some in Brussels see the India deal as welcome, although less ambitious than its other free trade agreements, in terms of scope and the extent of tariff cuts.
Agriculture off the table
Some sensitive agricultural items have been excluded from negotiations, an Indian trade ministry official said.
India will not open its agriculture or dairy sectors in any trade pact, officials have said, citing the need to protect millions of subsistence farmers.
The EU is pushing for steep tariff cuts on cars, medical devices, wine, spirits and meat, along with stronger intellectual property rules. India is seeking duty-free access for labour-intensive goods and quicker recognition of its autos and electronics sectors.
Beyond goods, the agreement is expected to expand services trade, investment and cooperation in digital trade, intellectual property and green technologies, as well as spur European investment in Indian manufacturing, renewable energy and infrastructure.
Challenges remain over regulatory alignment and the protection of sensitive sectors. The EU also insists that trade partners adhere to international standards on labour and the environment, with commitments to the Paris climate change agreement still to be settled.
