EU-India-free trade agreements-opportunities and advantages for German companies-ambitious agreements for 2025 planned planned

Free trade pact between the EU and India: ambitious agreement planned for 2025

At the end of February 2025, the European Union and India confirmed their intention to conclude a comprehensive free trade agreement this year. During a high-ranking visit by the EU Commission President Ursula von der Leyen in Neu-Delhi, concrete schedules for the conclusion of the negotiations were determined. This agreement, which the Leyen describes as “the largest of this kind in the world”, is of particular importance against the background of increasing global trade voltages and the search for reliable partnerships. The bilateral trade between the EU and India has tripled in the past ten years and has reached a value of 120 billion euros last year. With the initiative, both sides react to the Protectionist policy of the United States under Donald Trump and strive for strengthening their economic resilience.

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Historical context and new dynamics

The history of free trade negotiations between the EU and India is characterized by numerous interruptions. The original discussions began in 2007, but were frozen for almost a decade between 2013 and 2022. Only about three years ago, the negotiations came back to the negotiations when both sides, in the face of changed geopolitical realities, expressed a further interest in closer economic cooperation. This long phase of standstill makes the current ambitious schedule all the more remarkable, because now it is to be achieved within a year, which has not been achieved in almost two decades.

The new dynamic in the negotiations is carried by the highest political level. During your visit to Neu-Delhi at the end of February 2025, the EU Commission President of the Leyen emphasized the strategic importance of the partnership: "I am aware that it will not be easy, but I also know that timing and determination count and that this partnership is at the right time". This assessment was shared by the Indian Prime Minister Narendra Modi, who explained: "We created a blueprint for the cooperation" and added that the teams on both sides were commissioned to complete a freelance agreement that is beneficial for both sides by the end of the year.

The negotiations are revived in a completely changed international environment. The increasing protectionist tendencies in the global economy, in particular the tariffs threatened by US President Trump against both the EU and India, have brought the two trading partners closer together. This external threat serves as a catalyst for an acceleration of the negotiations, which previously only slowly made over the years.

Economic importance of the agreement

The economic importance of the desired free trade agreement can hardly be overestimated. The EU is already India's largest trading partner with a bilateral trading volume of 120 billion euros last year. This sum represents a tripling within a decade and shows the enormous growth potential of the trade relationships. A successful agreement would further strengthen this trend and open up new markets for companies on both sides.

The Indian market with around 1.4 billion inhabitants offers enormous sales opportunities for the European economy. German business representatives such as Andre Eckholt from the Hettich group of companies hope for concrete advantages: easier market access for goods and services in India, lower tariffs and more mobility for Indian specialists. The Federal Association of Wholesale, Foreign Trade, Services (BGA) sees the initiative as “the right sign at the right time” and emphasizes that trade contracts remain one of the most important elements to strengthen resilience and competitiveness, especially in these times.

For its part, the Indian side sees great opportunities to expand its export options to the European market. India has already completed trade agreements with Australia and the countries of European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland) in recent years. This shows the increasing willingness of India to integrate into the global economy and diversify its trade policy.

Geopolitical dimensions of the free trade agreement

The efforts for a free trade agreement between the EU and India are in a broader geopolitical context. They are part of a strategic realignment of both partners in an increasingly uncertain world order. The EU is looking for new trading partners in response to the escalating trade conflict with the United States. Donald Trump's threat of raising new tariffs to European goods has increased urgency in Brussels to strengthen alternative trade relationships.

At the same time, the dependence on China also plays an important role in the strategic considerations. The intended agreement is regarded as a component in the “DE Risking of the supply chain of China”, as Andre Eckholt expresses it. At a time when the dependence on individual suppliers and markets is seen as an increasing risk, the India location “further gains in importance against the geopolitical background”. This diversification strategy is an advantage for both the EU and India, since both partners strive for stable and reliable economic relationships.

However, the strategic partnership goes far beyond trade. As it became clear when visiting Leyens in Neu-Delhi, both sides also want to work closer together in the areas of security and defense. The Indian Premier Modi emphasized: “Our growing cooperation in defense and security issues is a symbol of our mutual trust. We will drive our cooperation in the areas of cyber security, maritime security and fight against terrorism ”. This comprehensive approach underlines the strategic character of the partnership in a time of geopolitical upheavals.

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Central issues and mutual demands

Despite the political will at the end of an agreement, there are still considerable hurdles that will have to be overcome in the coming months. The EU primarily wants to reduce import taxes on cars, wine and spirits. These products are of particular importance for European exporters, but in India they have comparatively high trading barriers.

In return, India calls for better access to the EU market for its pharmaceuticals, textiles and chemicals. The Indian pharmaceutical market has developed into a global actor in recent decades and is now aiming for simplified access to European consumers. Reliefs are also sought for textiles, a traditionally strong export sector in India.

The topic of agriculture is assessed as particularly difficult in the negotiations. The farmers in the EU fear unfair competition by non -European importers. At the same time, the topic is also delicate for India, since agricultural production there is mainly based on small companies. The balance between the protection of domestic agriculture and the opening of the markets is a central challenge.

Another potential dispute is the European environmental regulations, in particular the European CO₂ border compensation system (Carbon Border Adjustment Mechanism, CBAM), which applies to imports to the EU. While the EU considers these measures as “fair” and “compatible with the WTO”, they could be perceived as protectorist by the Indian side. A high EU official said: "These are unauthorized concerns that we are willing to clear up". The compatibility of environmental protection and trade liberalization will be an important aspect of negotiations.

Current developments and political framework conditions

The political support for the agreement is currently very pronounced on both sides. The visit from the Leyens in India at the end of February 2025, in which it was accompanied by a large part of its Brussels commissioners, underlines the importance of the EU of this partnership. It is your third trip to India, which is interpreted as a “clear sign of the growing strategic importance of relationships between the EU and India”.

Prime Minister Modi was also convinced of the need for closer cooperation at the meeting: “The strategic partnership between India and the EU is natural and organic. Their core is based on trust, the common belief in democratic values ​​and the mutual commitment to prosperity and progress ”. This emphasis on common values ​​and interests forms a solid basis for the upcoming negotiations.

The EU Commission President spoke of a “willingness on the Indian side to work with us more”. She continued: "In a world that has become more insecure and fragmented, India is also looking for reliable partners - and you can find them in Europe". This mutual perception as a trustworthy partner in difficult times could help to overcome complicated negotiation questions.

The BGA President Dr. Dirk Jandura calls on the EU Commission to consistently continue this path and, in addition to India, also mentions “Indonesia, Thailand and Australia” as important potential trading partners for the EU. At the same time, he warns that the agreement should "not be overloaded with unrealistic demands in the sustainability area" in order to enable a quick implementation.

Political will and trade policy tensions are driving EU-India agreements

The prospects for a successful conclusion of the free trade agreement between the EU and India in 2025 are quite positive despite the remaining challenges. The political will at the highest level and the external pressure through the trade policy tensions with the USA form strong incentives for both sides to find compromises and to quickly complete the negotiations.

The economic advantages of such an agreement would be significant for both partners. For the EU, access to one of the fastest growing markets in the world would improve, while India could deepen its integration into the global economy and expand its export options. However, the strategic dimension goes far beyond the purely economic aspects and also includes closer cooperation in areas such as security, defense and technology.

Ultimately, the intended agreement could also have a signal effect for international trade policy. In a time of increasing protectionist tendencies, it would be a clear commitment to open markets and multilateral cooperation. As formulated by the Leyen based on a special planetary constellation in the sky: "The planets are in a row - and Europe and India too". This metaphorical statement underlines the conviction that the moment has come for a deeper partnership between the EU and India.

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Strategic opportunities: the focus of the free trade agreement EU-India in focus

The free trade agreement between the European Union and India, which has been negotiating for years, promises significant economic advantages for German companies. After long phases of negotiations and several interruptions since 2007, both sides have been back in intensive conversations to overcome the remaining hurdles. The German-Indian economic relationships could be significantly strengthened by such an agreement, which is of particular strategic importance in view of the geopolitical developments and the need to diversify supply chains.

Economic growth potential and GDP effects

A successful free trade agreement between the EU and India would give the German economy significant growth impulses. According to a study by the IFO Institute on behalf of the Bertelsmann Foundation, Germany could expect a gross domestic product higher annually. This number shows the enormous economic potential of such an agreement and underlines the importance of India as a trading partner for Germany.

These positive effects are particularly remarkable in the context of current global economic challenges. The study places Germany second in the EU with regard to the expected economic advantages, just behind Great Britain, which maintains special relationships with India due to its colonial history. The forecast growth effects would not only deliver short -term economic impulses, but could also contribute to strengthening German economic strength in the long term.

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Sector -related advantages for German industry

Not all economic sectors would benefit equally from a free trade agreement. The effects for German manufacturers of motor vehicles, machines and equipment would be particularly positive. These industries, which traditionally be among the strengths of the German export industry, could increase their added value by up to 1.5 billion euros per year. The relieved access to the Indian market would enable German companies to expand their export activities and gain new market shares.

This is of particular importance for the automotive industry, since the Indian market is currently shielded by high duty barriers. Anyone who introduced fully assembled cars to India finally pays up to 100 percent depending on the size of the vehicle. A reduction or gradual abolition of this tariff would significantly improve the competitive position of German automobile manufacturers and could lead to significant increases in sales.

However, it should also be taken into account that not all industries would benefit. In particular, the German service industry as well as the textile and clothing industry should expect a expected minus of several hundred million euros each. This is mainly due to the competitive advantage that India has in these areas due to lower wage costs.

Removing trade barriers and improved market conditions

A central advantage of a free trade agreement would be the reduction of existing trade barriers that are currently difficult for market access for German companies. According to the German Chamber of Handels in India, companies primarily call for the comprehensive reduction in tariffs (59%), flexible rules of origin (46%), transparent and predictable customs procedures (45%) and the reduction of non-tariffs (33%). These improvements would significantly reduce trade costs and strengthen the competitiveness of German products on the Indian market.

The EU currently lists 31 official trade barriers in India that are burdening European companies. For the German economy, the partly very high import tariffs, import and export destructions, localization requirements as well as isolated procurement and service sectors are particularly relevant. A free trade agreement would systematically reduce these barriers and thus make market access for German companies considerably easier.

In addition, an agreement would improve mutual recognition of standards and certifications. International standards used within the EU are often not fully adopted and accepted in India. The agreement could remedy the situation through regulatory cooperation and thus reduce the regulatory effort for exporting companies.

Diversification of supply chains and strategic advantages

In a time of increasing geopolitical uncertainties, the diversification of supply chains is becoming increasingly important. A free trade agreement with India would help German companies reduce their dependence on other markets, especially China. For Germany, India is considered a key to reduce the strong dependence of the China industry. This diversification strategy corresponds to the concept of the “de-risking”, which is becoming increasingly important in German and European economic policy.

In view of the size and dynamics of the Indian economy and the population, close institutional relationships of the EU with India are in the strategic interest of the German economy. India is referred to as the “new growth story of Asia”, with forecast economic growth rates of over 6 percent for the years 2023 and 2024, i.e. significantly higher than in the case of China. This economic dynamic makes India an attractive future market for German companies.

The geopolitical changes and the increasing protectionist tendencies in the global economy underline the importance of reliable trading partnerships. An agreement with India would send a strong signal for open markets, rule -based trade and against protectionism and foreclosure. This is particularly important in times when over half of the EU outer trade is only secured by WTO rules, including trade in India.

Legal security and investment protection

An important advantage of a comprehensive trade agreement would be improved legal certainty for German companies that work in India or want to invest there. In view of the erosion of WTO dispute setting, a bilateral agreement with enforceable agreements offers important planning security for the German economy. This is particularly relevant in view of the fact that 53% of the companies call bureaucracy as a central burden in India and list 47% corruption as an obstacle.

To protect the investments of German companies, high protection requirements in the investment protection agreement should be agreed, which guarantee the companies planning and legal certainty. This would strengthen the trust of German investors in the Indian market and could lead to an increase in direct investment.

The protection of intellectual property would also be improved by a comprehensive agreement. The EU should work for more intellectual property in India, including the protection of geographical origin. This is particularly important for innovative German companies that rely on the protection of their patents and brands.

Specialist mobility and potential for workers

Another important aspect of a free trade agreement would be the relieved mobility of specialists between Germany and India. For specialists and business travelers, temporary entry should be made easier for professional purposes. Agreements that simplify the mobility of specialists make an important contribution to the internationalization of German companies, especially with a view to the service sector.

This mobility is also important against the background of the shortage of skilled workers in Germany. In a survey by AHK India, the availability of workers (56%) and labor costs (45%) are mentioned as the most important positive factors for the India business. German companies could benefit from the large pool of qualified workers in India, especially in technical and IT-related professions.

Existing economic relationships and future potential

Economic relationships between Germany and India are already substantial and offer a solid basis for a further deepening. More than 2,000 German companies are already represented in India and employ a total of over 500,000 employees. The German-Indian trade volume was 29.9 billion euros in 2022, which corresponds to an increase of 28% compared to the previous year.

The EU is India's third largest trading partner and the second most important export market and the largest investor in India. Around 6,000 European companies create around five million jobs in the country directly and indirectly. These figures illustrate the economic integration between the EU, Germany and India, which would be further strengthened by a free trade agreement.

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Challenges and open negotiation points

Despite the promising prospects of a free trade agreement, there are still considerable challenges and open negotiation points. The automotive and pharmaceutical sector are considered large hurdles for an agreement. While the EU wants to reduce the high Indian tariffs to imported vehicles, India sees it a danger to domestic production.

There are also difficulties in the agricultural sector, since a significantly larger part of the population works in this area in India than in Germany. The topic of agriculture is assessed as particularly difficult in the negotiations, since farmers in the EU fear unfair competition by non -European importers.

Conflicts could also arise in the area of ​​sustainability and environmental protection. The BGA President Dr. Dirk Jandura warns that the agreement should be "not overloaded with unrealistic demands in the sustainability area" in order to enable a quick implementation.

EU-India trading pact: strategic advantages for German companies

A free trade agreement between the EU and India would offer the German economy numerous advantages, from increasing the GDP to improved market access to the diversification of supply chains and increased legal certainty. In particular, the key German industries such as automotive and mechanical engineering could benefit from such an agreement.

Despite the existing challenges in the negotiations, both economic and geopolitical reasons speak for a successful conclusion of the agreement. Political support is available on both sides, as the statements of Chancellor Scholz show, who pleads for “rapid progress and quick results” and emphasizes that “more in months” than in years.

India's strategic importance for Germany and the EU will continue to increase in the future, in particular against the background of the forecast economic development of India. As an emerging economic power with a young, growing population, India offers enormous opportunities for German companies in the long term. A free trade agreement would significantly expand these opportunities and could make an important contribution to securing the future of the German economy.

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