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The European Union and India have agreed on a long-awaited free trade agreement that will link two economic giants accounting for 21.1 percent of global GDP and 23.4 percent of the world’s population. A new analysis by the Kiel Institute for the World Economy shows that deeper EU–India integration could boost bilateral trade by 41 to 65 percent, raise real incomes by 0.12–0.13 percent of GDP on both sides, and limit dependence on riskier markets—at a moment of rising global trade fragmentation.
Trade in goods between the EU and India has grown by almost 90 percent over the past decade, reaching EUR 48.8 billion in EU exports in 2024. Yet high Indian tariffs—up to 150 percent in some sectors—continue to restrict market access for European firms, despite around 6,000 EU companies already operating in India.
“India is one of the fastest-growing major markets in the world, but it remains highly protected,” says Julian Hinz, Research Director at the Kiel Institute for the World Economy. “A comprehensive EU–India trade agreement would open substantial parts of the economy, strengthen supply chains, and reduce vulnerability to geopolitical shocks.”
Model simulations suggest that a comprehensive agreement could increase Indian exports to the EU by 41 percent and EU exports to India by 65 percent. The resulting income gains—equivalent to roughly EUR 22 billion annually for the EU and 4.2 billion for India—are predominantly in export-oriented sectors such as IT services, textiles, chemicals, machinery, and food processing.
The timing is critical. India currently faces punitive US tariffs of up to 50 percent, introduced in stages during 2025. These measures have sharply reduced bilateral trade volumes without delivering economic harm on all sides. “Against this backdrop, the EU–India agreement would act as a stabilizer,” says Vasundhara Thakur, researcher at the Kiel Institute. “It provides an insurance mechanism against global trade turmoil and sends a strong signal that rules-based trade cooperation still works.”
Read analysis now: The EU–India Trade Deal: Strategic Diversification in an Era of Uncertainty/https://www.kielinstitut.de/publications/the-eu-india-trade-deal-strategic-diver...
Media Contact:
Mathias Rauck
Chief Communications Officer
T +49 431 8814-411
mathias.rauck@kielinstitut.de
Kiel Institute for the World Economy
Kiel Office
Kiellinie 66
24105 Kiel
Germany
Berlin Office
Chausseestraße 111
10115 Berlin
Germany
Contact
+49 431 8814-1
www.kielinstitut.de
Prof. Dr. Julian Hinz
Director Trade Policy
T +49 431 8814-507
julian.hinz@kielinstitut.de
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