India-EU FTA: The India–European Union free trade agreement arrives at a moment when trade deals are no longer judged by export projections alone. They are judged by whether they reduce vulnerability. In that sense, the agreement is less about tariff arithmetic and more about insurance. As the United States turns erratic and protectionist instincts harden across advanced economies, India’s decision to lock in preferential access to Europe reflects a sober reassessment of risk rather than a burst of trade optimism.
Finalised this week after nearly two decades of intermittent negotiations, the deal reduces or eliminates tariffs on 96.6% of European Union exports to India by value, yielding estimated duty savings of €4 billion annually for European firms. Indian exporters will gain reduced or zero duties on 99.5% of their exports to the EU over a seven-year transition. The European Commission expects EU exports to India to double by 2032. These numbers matter, but they do not define the agreement’s strategic weight.
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Textiles and Apparel: Relief from a Structural Disadvantage
Indian textile and apparel exports to the EU earlier faced duties of 8–12%. Their removal narrows the gap with Bangladesh and Vietnam. Zero-duty access to a large and relatively stable consumer market should support exporters in Tiruppur, Surat, Ludhiana, and Bengaluru.
The gains will not be automatic. European buyers remain exacting on delivery schedules, labour compliance, and environmental standards. Tariff relief removes a handicap; it does not confer dominance. That distinction is important.
Handlooms and MSME-led craft producers may benefit from simplified customs procedures. In their case, non-tariff barriers have long mattered more than headline duties. The agreement modestly eases that constraint.
Leather, Footwear and Allied Manufacturing
The leather and footwear sectors stand to gain more predictably. Duty elimination improves margins for exporters clustered in Agra, Chennai, and Kanpur. As European brands seek to diversify sourcing away from single-country dependence, Indian suppliers gain relevance. This is a story of cost correction rather than industrial leapfrogging.
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Gems and Jewellery: Scale Where None Existed
Indian jewellery exports to the EU were modest—about $628 million in 2024—largely because tariffs made Indian products uncompetitive against rivals. With duties eliminated, industry projections suggest exports could rise sharply over the next few years. Clusters such as Surat, Mumbai, and Jaipur stand to benefit, while reduced dependence on the US market adds cyclical resilience.
Pharmaceuticals and Chemicals: Incremental, Not Transformational
Indian generics and API manufacturers already serve European markets. Tariff reductions marginally improve margins but do not radically alter competitiveness. The larger opportunity lies in specialty chemicals, contract manufacturing, and joint R&D, as European firms look for supply chains less exposed to geopolitical risk.
Automobiles: Liberalisation with Guardrails
India’s automobile market has long been protected, with import duties once touching 110%. Under the FTA, tariffs will fall to 30–35% initially and then to 10% over five years, capped at 250,000 vehicles annually. European brands such as Volkswagen, Mercedes-Benz, BMW, and Renault gain access to India’s premium segment, but the quota limits disruption.
Indian auto-component manufacturers may benefit indirectly through integration into European electric and hybrid supply chains. The opening is deliberate, not sweeping.
India-EU FTA and agriculture exclusions
Agriculture remains largely outside the agreement. Dairy, rice, sugar, soya, and beef are excluded from tariff liberalisation, reflecting domestic political constraints rather than negotiating failure. Selective openings in processed foods and beverages will expand European exports of wines, spirits, and olive oil, while Indian value-added agricultural products may find niche access in Europe. The fence remains intact.
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Services, Investment and Labour Mobility
The EU will open 144 services sub-sectors to Indian firms; India will open 102 to European providers. Financial services, IT, telecom, maritime services, and professional services dominate—areas where Indian firms already compete globally.
Easier movement for Indian professionals marginally strengthens services exports and reduces over-reliance on the US visa regime. Europe already accounts for over $70 billion in cumulative FDI into India. The agreement improves predictability for investments in clean technology, advanced manufacturing, and sustainable infrastructure.
Trade Defence and Enforcement: Where Access Is Tested
What will ultimately determine the agreement’s durability is not tariffs but enforcement. The European Union is among the most frequent users of anti-dumping and safeguard measures, and Indian exporters in steel, chemicals, tyres, textiles, and engineering goods have often faced investigations. The FTA does not significantly restrain this discretion. Nor is the dispute settlement mechanism designed for speed. Market access can therefore be narrowed after the fact, through compliance reviews and trade remedies, even as tariffs fall. For exporters, certainty will depend less on negotiated rates and more on how predictably these instruments are deployed.
The most visible unresolved challenge is the EU’s Carbon Border Adjustment Mechanism. CBAM costs are not neutralised under the FTA. The earlier suspension of Generalised System of Preferences benefits underlines the urgency of adapting to sustainability-linked trade rules. Compliance, not concessions, will shape competitiveness.
A recent Kiel Institute assessment suggests the agreement will deliver modest but meaningful gains in India’s real value-added growth while reducing dependence on a single market. That is the right scale on which to judge it. The India–EU FTA is not a bet on export acceleration. It is a hedge against a world where stable trading partners are becoming scarce.