India and the EU are poised to finalize their Free Trade Agreement on January 27, a deal christened ‘Mother of All Deals’ that promises to elevate India’s trade surplus with Europe beyond $51 billion by FY2031. This comes after a decade of negotiations, fast-tracked by global trade turbulence.
MK Global’s latest analysis reveals the FTA’s potential to revolutionize India’s trade profile. From 17.3% in FY2025, the EU could account for 22-23% of India’s exports, despite India’s slim 0.8% penetration in EU markets today. The EU’s trade stance with India has reversed—from a $3 billion surplus in FY2019 to a $15 billion deficit now.
Supporting Europe’s supply chain diversification away from China, the agreement unlocks opportunities in India’s textiles, shoes, electronics, machinery, and chemical sectors. Bilateral trade reached $136 billion in FY25, with India’s $75.9 billion exports surpassing $60.7 billion imports.
Indian successes like smartphones, textiles, footwear, tires, medicines, auto parts, processed petroleum, and diamonds are filling gaps left by redirected global manufacturing. Conversely, EU’s high-value exports—machinery, aircraft, electronic parts, chemicals, medical tech, and metal scrap—fuel Indian industries, from large factories to SMEs, driving productivity gains.
Expectations include duty reductions for Indian labor-intensive exports and enhanced access for European cars and alcohol in India. This strategic alliance enhances competitiveness, secures supply lines, and signals a new era of prosperous trade relations.