Context: India and the European Union (EU) have announced the conclusion of negotiations on a landmark Free Trade Agreement (FTA), often described as the “mother of all trade deals.” The pact creates a free-trade zone covering around 2 billion people and nearly 25% of global GDP. The agreement is expected to apply provisionally by Q4 2026 and enter into full force by early 2027, subject to ratification. A biennial review clause will allow both sides to address implementation challenges and update provisions.
Key Provisions of the India–EU FTA
1. Trade in Goods
- EU Commitments: Elimination of tariffs on 99.5% of India’s exports by value, with 90.7% receiving immediate zero-duty access.
- India’s Concessions: Tariff concessions covering 97.5% of EU import value, across 92.1% of tariff lines.
- Phased Liberalisation: Customs duties on 49.6% of European tariff lines are eliminated immediately, while the rest see phased reductions over 5, 7, and 10 years.
- Labour-Intensive Sectors: Textiles, apparel, leather, footwear, gems and jewellery, and marine products gain immediate duty-free access.
- Sensitive Exclusions: Dairy, cereals, poultry, and sugar are excluded to protect domestic producers.
- Automobiles: Import duties on European cars will be reduced to 10%, subject to an annual quota of 250,000 units.
2. Trade in Services
- Market Access: India gains access to 144 EU service subsectors, while the EU gains access to 102 Indian subsectors.
- Mobility of Professionals: Binding commitments to ease visa norms for Indian IT professionals, nurses, and consultants.
- Commercial Presence: European firms gain enhanced access to India’s financial, legal, and maritime services.
- Family Rights: Spouses and dependents of intra-corporate transferees are granted entry and work rights.
- AYUSH Recognition: AYUSH practitioners may work under home titles in EU states where these practices are unregulated.
- Digital Safeguards: Prohibition on mandatory source-code transfer, protecting Indian IT intellectual property.
3. Regulatory and Safeguard Measures
- Rules of Origin: Product-Specific Rules with self-certified Statements of Origin, reducing compliance costs.
- SPS Equivalence: Alignment of Sanitary and Phytosanitary (SPS) measures to reduce rejection of Indian agri-exports.
- CBAM Dialogue: A technical mechanism to align carbon reporting standards under the EU’s Carbon Border Adjustment Mechanism (CBAM).
- Rebalancing Rights: India can impose retaliatory tariffs if EU non-tariff barriers negate trade benefits.
Strategic Significance for India
The FTA enhances India’s strategic autonomy by diversifying trade ties beyond the US–China axis. Duty-free access improves export competitiveness, especially against countries like Bangladesh and Vietnam. Cheaper European machinery can spur industrial modernisation, while regulatory alignment may upgrade India’s quality and standards ecosystem.
Key Concerns
Persistent phytosanitary barriers, CBAM-related costs for steel and aluminium, competitive pressure on MSMEs, the absence of EU “data secure” status, and historically complex rules of origin could limit gains if not addressed proactively.
Conclusion
The India–EU FTA is a transformative step toward deep economic integration. Its success will depend on effective implementation, MSME support, and sustained regulatory dialogue.