The breakthrough in negotiations on the EU–India free trade agreement marks one of the most consequential advances in Europe’s trade policy in recent years. Negotiated since 2007 and now heading toward ratification, the agreement opens a new phase of economic cooperation between the European Union and India, with implications for nearly two billion people.
For Germany, India has long ceased to be merely a future market. Germany is already India’s most important EU trading partner, with bilateral trade reaching around EUR 31 billion in 2024. The agreement promises a substantial leap forward: more than 90% of tariffs are to be abolished or significantly reduced on both sides. This includes sharp cuts in duties on machinery, chemicals, automotive components, and industrial inputs. For German companies, this would materially lower barriers to market entry and enhance competitiveness, potentially eliminating several billion euros in customs duties each year. According to expectations from the European Commission, EU goods exports to India could double by 2032. Sectors such as mechanical engineering, automotive manufacturing, chemicals, pharmaceuticals, and medical technology are expected to benefit most. German firms are already well positioned in these areas: around 1,800 German companies operate in India, employing more than 600,000 people. The agreement therefore serves as a strategic lever to further expand German production, investment, and value creation in the Indian market.
At the same time, the agreement does not eliminate all obstacles. India continues to pursue selective protectionist policies. Public procurement remains largely closed, comprehensive investment facilitation is absent, and the rules of origin and related documentation required to access tariff preferences are more complex than in many other EU trade agreements. Moreover, numerous non-tariff barriers persist, ranging from demanding certification requirements to localization rules and administrative red tape. Surveys conducted by AHK India indicate that more than half of German companies operating locally continue to see these factors as a significant burden.
Despite these limitations, the strategic importance of the agreement is considerable. India is a young and rapidly growing economy with strong industrial momentum. It is also a key partner for diversifying supply chains and reducing strategic dependencies. In an era of intensifying geo-economic competition, the agreement strengthens Europe’s capacity to act and offers German companies long-term opportunities in one of the world’s most important growth markets.
For this reason, it will be crucial during the ratification process for the EU and the German government to push for further facilitation – particularly to ensure that small and medium-sized enterprises can effectively benefit from the agreement. India’s forthcoming customs reform offers a window of opportunity in this regard. The EU–India free trade agreement is a historic milestone. The next step is to ensure that it delivers tangible results.
Volker Treier is an economist and has headed foreign trade at the German Chamber of Industry and Commerce (DIHK) since 2014.
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