Context

• India and the European Union (EU) have made notable headway in the 12th round of Free Trade Agreement (FTA) negotiations, with the digital trade chapter finalised in principle and substantial progress achieved on services and investment chapters.

Key Highlights

• Digital Trade Chapter – A milestone development: It covers cross-border data flows, crucial for e-commerce and digital services.
• Significance: A key enabler for India’s IT and digital economy to scale up and integrate with the global services ecosystem.
• Pending disclosure: Textual positions of both parties are yet to be made public.

India-EU FTA Overview

• Negotiation Resumption: Talks resumed in June 2022 after an 8-year hiatus (stalled in 2013 due to market access disagreements).
• Objective: To finalize a comprehensive trade agreement covering goods, services, investments, and geographical indications.
• Negotiation Structure: The agreement will be concluded in two phases, following India’s phased approach used in previous FTAs (e.g., with Australia).
• This is partly due to the volatile global trade environment, including US tariff actions.

India-EU Services and Investment Integration

• EU’s objective: To eliminate “discriminatory and disproportionate obstacles” for EU service providers.
• India’s advantage: Rapidly expanding IT and financial services sectors could benefit from increased EU investment.

Cross-Border Data Flow – Strategic and Contested

• Global context: Cross-border data flows are critical in the age of Artificial Intelligence (AI), the Fourth Industrial Revolution’s cornerstone.
• India’s position: Resistant to diluting data localisation norms, emphasizing policy space, privacy, and cyber sovereignty.
• India’s policy stance: India has traditionally resisted altering its stance on data localisation under any plurilateral agreements at the World Trade Organization (WTO) to preserve policy space.
• The Reserve Bank of India’s (RBI) 2018 norms: Made it mandatory for payment system providers such as Mastercard and Visa to store payment data of Indian residents within the country.
• UN Conference on Trade and Development’s (UNCTAD) 2018 report: Stressed data’s strategic value and endorsed localisation for development and regulatory oversight.

India-EU Relations

• Political cooperation: India-EU relations date to the early 1960s, and a cooperation agreement signed in 1994 took the bilateral relationship beyond trade and economic cooperation.
  • The first India-EU Summit, in 2000, marked a watershed in the evolution of the relationship. 
  • At the 5th India-EU Summit at The Hague in 2004, the relationship was upgraded to a ‘Strategic Partnership’. 
• Economic cooperation : India’s bilateral trade in goods with the EU was USD 137.41 billion in 2023-24, making it the largest trading partner of India for goods.
  • EU is India’s largest trading partner for goods, 17% of India’s exports go to the EU and 9% of EU exports come to India.
• Other areas of cooperation:
  • The India-EU Water Partnership (IEWP), established in 2016, aims to enhance technological, scientific, and policy frameworks in water management.
  • In 2020, there was an agreement for research and development cooperation in the peaceful uses of nuclear energy between the European Atomic Energy Community and the Government of India.
  • India and the EU established the Trade and Technology Council (TTC) in 2023. The TTC is a forum for the two parties to collaborate on trade, technology, and security. The TTC’s goals.

Way Forward

• The recent progress in India-EU FTA negotiations represents a turning point, particularly in digital trade and investment. 
• By balancing economic integration with regulatory sovereignty, India seeks to unlock growth opportunities while preserving national interests — a delicate equilibrium that aligns with its broader trade and digital strategy in the evolving global order.