US President Donald Trump’s move to slap 50% tariffs on Indian goods has sparked calls from Indian economists and analysts to fast-track the long-pending European Union (EU)-India Free Trade Agreement (FTA)

Former Indian Finance Commission chairman Arvind Panagariya was recently quoted saying  that India should "aggressively pursue" a FTA with the EU.

“India faces a pivotal moment in the current geopolitical order of higher tariffs on exports and the country should now push the pedal on its reform agenda,” he said.

“ At this pivotal moment, we should aggressively pursue the free trade agreement with the European Union. That is very, very important. As one market seems to be kind of closing, we need to open wider another market,” Panagariya said while speaking at the Business Today India@100 event in New Delhi 8 August.

 Amit Jain, president of the Confederation of Indian industry Punjab, urged the government to “fast-track its FTA negotiations.”

 “The India-EU trade negotiations must be concluded swiftly. The UK FTA should be operationalised very quickly,” he told a meeting In Ludhiana last week.

No FTA Under Pressure

However, rushing into an FTA under pressure could prove detrimental to India’s interests, leaving the other side in a position to extract concessions as easily as wringing water from a sponge.

Following the successful conclusion of the India-UK Free Trade Agreement in May, it was widely speculated that the EU would come under pressure to wrap up its own negotiations with India.

During their meeting in Brussels that same month, European Commissioner for Trade Maroš Šefčovič and India’s Commerce and Industry Minister Piyush Goyal struck an optimistic tone on the progress of the EU-India FTA. Hopes were raised that an interim deal might be concluded by July.

But July has come and gone, and both Brussels and New Delhi have remained conspicuously silent.

India and the EU are now preparing for the next round of FTA negotiations, scheduled for September in New Delhi, following the 12th round held earlier in Brussels.

Sanctions Can Be Flashpoint

In addition to the contentious issue of tariffs on goods, the proposed interim agreement was expected to address several other critical areas, including non-tariff barriers and government procurement.

The EU-India trade negotiations remain exposed to external geopolitical tension. In late July, the EU sanctioned an Indian refinery company Nayara linked to Russia’s Rosneft.

 The 27-member bloc also banned the import of refined oil made from Russian crude, a move that will hurt Indian refiners.

India condemned the EU sanctions and accused Brussels of double-standards.

 “It is revealing that the very nations criticising India are themselves indulging in trade with Russia,” said Indian External Affairs  Ministry spokesperson Randhir Jaiswal.

The EU, he said, had traded more with Russia in goods in 2024 than India had. “European imports of LNG in 2024, in fact, reached a record 16.5 million tonnes, surpassing the last record  of 15.21 million tonnes in 2022,” Jaiswal said.

 From India’s perspective, such measures are seen as unilateral and extraneous to the trade talks, potentially undermining trust and goodwill at a crucial stage of negotiations.

Analysts argue that India’s commercial ties should not be penalized for its 'strategic autonomy' in foreign policy. With the next round of negotiations scheduled for September, the episode has added a layer of diplomatic sensitivity to an already delicate balancing act.

Sanctions could become a major flashpoint in the FTA negotiations, posing a serious risk of halting or even collapsing the FTA negotiations altogether.

India and the EU agreed to finalize the FTA by the end of 2025 during a visit by European Commission President Ursula von der Leyen to New Delhi last February.

(Link of MAY 4 article by author: https://southasiamonitor.org/eu-watch/eu-india-free-trade-agreement-not-race-finish-line)

(Link of May 26 article by author: https://southasiamonitor.org/eu-watch/eu-india-fta-possible-july)

(The author is an Indian journalist who is a long time resident in Brussels. Views expressed are personal. He can be reached at nawab_khan@hotmail.com . Social handle X: @NawabKhan10)