India–EU FTA: A New Chapter in Strategic Economic Partnership

Context

India and the European Union have formally wrapped up negotiations on a comprehensive Free Trade Agreement (FTA), bringing to a close almost two decades of discussions and marking a major milestone in bilateral relations.

Negotiation Journey – Talks that began in 2007 witnessed several interruptions due to differences over tariff levels, regulatory standards, and protection of sensitive sectors. The renewed momentum reflects a shared intent to elevate economic and strategic cooperation.

Core Purpose – The agreement seeks to dismantle trade barriers, enhance market access, and create a predictable framework for long-term economic engagement.

Agreement Architecture – The pact spans trade in goods and services, investment flows, professional mobility, regulatory collaboration, and sustainability commitments. Together, India and the EU represent a market of nearly 2 billion consumers and a substantial share of global trade and output.

Market Access Provisions

• Tariff elimination or deep cuts on about 96–99% of merchandise trade.
• Immediate zero-duty entry for many labour-intensive Indian products such as apparel, leather goods, footwear, spices, tea, toys, sports equipment, and gems & jewellery.
• Gradual tariff phase-out schedules for other items to ensure smooth transition.

Exclusions and Protective Measures

• Farm Sector: Sensitive products like dairy, cereals, and select poultry remain shielded.
• Automotive Segment: Step-by-step reduction of Indian duties on European vehicles, often through quotas.
• Alcoholic Beverages: Progressive lowering of duties on wine and spirits with safeguards.

Services Liberalisation

• Commitments across more than 140 service categories including IT, finance, engineering, and education.
• Easier entry and temporary stay for professionals, business visitors, and service suppliers.

Trade and Investment Outcomes

• European exports to India projected to rise sharply by 2032.
• Indian exporters gain new opportunities estimated at around ₹6.4 trillion across sectors.
• Strong growth prospects for textiles, leather, marine products, engineering goods, and gems & jewellery.

Manufacturing and Value Chains

• Reduced cost of production in India due to cheaper imported capital goods and components.
• Greater participation of Indian firms in Europe-centric supply chains.
• Enhanced prospects for EU-led FDI into India.

Geopolitical Context

• Encourages diversification of trade partners amid global uncertainties.
• Supports India’s positioning as an alternative manufacturing hub.
• Strengthens EU’s strategic footprint in the Indo-Pacific.

Regulatory Coordination

• Cooperation on financial supervision, particularly concerning clearing corporations.
• Facilitates smoother cross-border financial operations.

Green and Social Dimensions

• Provisions on labour rights, environmental standards, and climate cooperation.
• Scope for EU assistance in India’s clean energy and climate initiatives.

Defence and Security Dialogue

• Collaboration on counter-terrorism, maritime safety, cybersecurity, and emerging technologies.

Implementation Hurdles

• Ratification by multiple EU bodies and India’s legislature.
• Balancing domestic interests in protected sectors.
• Ongoing need for regulatory convergence.

Outlook

• The agreement has the potential to reshape India–EU economic relations.
• Its success will depend on timely ratification, effective implementation, and continuous policy coordination.

Source : PIB