India–EU (European Union) FTA

Why in the News?

India–EU announced the conclusion of negotiations for Free Trade Agreement (FTA), considered Mother of all deals, marking an important milestone in India's strategic economic partnerships. 

More on the news

• FTA was announced at 16th India–EU Summit, held in India, making EU, India's 22nd FTA partner. 
• Negotiations began in 2007, with the talks suspended in 2013 and relaunched in 2022. 
• Negotiated texts would undergo legal review and translation before being submitted for approval by European Council and consent by European Parliament. 
• Ratification by India will follow before the agreement enters into force.
• During the 16^th Summit, EU-India Security and Defence Partnership (SDP) was also signed providing an opportunity for India's burgeoning defence industrial eco­system. 
  • It is EU's third SDP in Asia after Japan and South Korea. 

EU, Key Features and Relations with India About: Unique economic and political union operating as single market allowing goods, services, capital and persons to circulate freely, without technical, legal and bureaucratic barriers. Founded: In 1951 after Second World War by six countries (Belgium, France, Germany, Italy, Luxembourg, and Netherlands). Current Member States: 27 countries. United Kingdom officially left the European Union on January 31, 2020 Five Main Institutions of EU: European Parliament, European Council, European Commission, Court of Justice and Court of Auditors. Key Features:  Elections: Held every five years to elect new Members of European Parliament. Open borders: Through Schengen area that allows people to move around without border checks since 1985.  All EU Member States, except Cyprus and Ireland, are members of Schengen area.  Single currency: Launched in 1999, euro is the official currency of 21 EU countries (known as euro area).  India and EU: 4th and 2nd largest economies respectively, comprising 25% of Global GDP, one third of global trade, and home to almost 2 billion people.  In 2024–25, India's bilateral trade in goods with EU stood at INR 11.5 Lakh Crore with exports worth INR 6.4 Lakh Crore and imports worth INR 5.1 Lakh Crore.  India-EU trade in services reached INR 7.2 Lakh Crore in 2024.

Key Features of India-EU FTA

• Strategic Access to European Markets: India gained preferential access to European markets across 97% of tariff lines, covering 99.5% of trade value.
  • 70.4% tariff lines covering 90.7% of India's exports will have immediate duty elimination for important labour-intensive sectors like textiles, leather and footwear, etc. 
• Key labour-intensive sectors: Like textiles, apparel, marine, leather, footwear, chemicals, etc., currently subjected to 4%-26% import duty in EU would face zero duty enhancing competitiveness in EU market. 
• Access to Indian Markets: India is offering 92.1% of its tariff lines covering 97.5% of EU exports, with 49.6% of tariff lines having immediate duty elimination. 
• Powering India's Talent across Europe: Through Social Security Agreements in 5 years with all EU Member States and a framework for entry of Indian students to study and avail post study work visa.
• Services Sector: Broader and deeper commitments from EU across 144 services subsectors, including IT/ITeS, professional services, etc. 
• Others: 
  • Preferential Market Access for agricultural products like tea, coffee, etc.;
  • Product Specific Rules (PSR) aligned with existing Supply Chains; 
  • Expanding Horizons for India's traditional medicine; 
  • Reinforcing intellectual property protections under TRIPS; 
  • Cooperation on Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) matters.
• Other Sector Specific Gains: Preferential market access for engineering goods; Boost to Marine, Leather and Footwear exports; Gaining zero duty access in textiles and clothing, etc. 

Key Issues with EU-India FTA

• Ambiguity on Outcomes: For this FTA to be implemented, it must be first agreed by European Council by a qualified majority, and also by the European Parliament. 
  • The process is lengthy and arduous and contents and intentions of agreement could take 5-10 years to be implemented fully before the realisation of its impacts. 
• Complex Rules of Origin (ROO): The agreement relies on product-specific rules of origin, which are designed to ensure that significant processing takes place within India or the EU to prevent trade abuse by third countries.
• Carbon Border Adjustment Mechanism (CBAM): The EU's carbon tax on imports (such as steel, aluminium, and cement) could burden Indian exporters with an estimated 2–4 billion in annual compliance costs and complex data reporting requirements.
• Services Barriers: India faces hurdles in exporting services due to restrictions on remote service delivery and high minimum salary thresholds for EU visas.
  • To ease the movement of its professionals, India is seeking Mutual Recognition Agreements (MRAs) for professional qualifications in fields such as medicine, engineering, and accountancy. 
• Data Security Barriers: EU has not granted India "data secure" status under its General Data Protection Regulation (GDPR), which results in higher compliance costs for Indian tech and digital firms compared to their counterparts in other countries.

Conclusion

WhileIndia–EU FTA, complemented by defence and security cooperation framework, may not rewrite global trade and growth overnight, but it meaningfully reshapes movement of trade, investment, and supply chains in a new era of globalization.

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