India-EU Free Trade Agreement: Unlocking Strategic Economic Opportunities

Briefing Doc: India-European Union Free Trade Agreement (FTA)

Executive Summary

The conclusion of negotiations for the India-European Union Free Trade Agreement (FTA) marks a milestone in the strategic economic partnership between the world's 4th and 2nd largest economies. Dubbed the "Mother of All Deals," this modern, rules-based agreement aims to unlock a combined market of over USD 24 trillion (INR 2091.6 Lakh Crore), impacting approximately 2 billion people.

The FTA provides India with preferential access to 99.5% of its export trade value, while India offers the EU access to 97.5% of its export value. Key highlights include immediate duty elimination for labor-intensive sectors, a comprehensive framework for professional mobility, and strategic safeguards for sensitive domestic industries such as dairy and cereals. This agreement is designed to integrate Indian businesses—particularly MSMEs—into European value chains, fostering innovation and securing long-term economic resilience as India progresses toward its "India@2047" developmental goals.

Strategic and Economic Context

The FTA evolves the India-EU relationship from a traditional trade arrangement into a multifaceted partnership providing a stable, predictable environment for exporters and investors.

Current Trade Metrics (2024-25)

• Bilateral Merchandise Trade: Approximately INR 11.5 Lakh Crore (USD 136.54 billion).
• Indian Exports to EU: Approximately INR 6.4 Lakh Crore (USD 75.85 billion).
• Services Trade (2024): INR 7.2 Lakh Crore (USD 83.10 billion).

Core Objectives

• Market Integration: Deeper integration between two global economic powerhouses.
• Future-Proofing: Addressing contemporary global challenges through a rules-based framework.
• Investment Stability: Enabling Indian businesses and MSMEs to plan long-term investments and integrate into European value chains.

Market Access and Tariff Liberalization

India’s Strategic Access to the EU Market

India has secured preferential access across 97% of tariff lines, covering 99.5% of trade value. The breakdown of these concessions is as follows:

India’s Offer to the European Union

India is offering concessions on 92.1% of its tariff lines, covering 97.5% of EU exports:

• Immediate Elimination: 49.6% of tariff lines.
• Phased Elimination (5-10 Years): 39.5% of tariff lines.
• Phased Reductions/TRQs: 3% of products, including apples, pears, peaches, and kiwi fruit.

Detailed Sectoral Impact Analysis

Labor-Intensive Industries

Sectors currently facing EU import duties between 4% and 26% (totalling USD 33 billion in exports) will transition to zero duty upon the FTA's entry into force.

• Textiles and Apparel: Zero duty access across all lines. Aims to capture a larger share of the EU’s INR 22.9 Lakh Crore (USD 263.5 billion) import market.
• Leather and Footwear: Tariffs up to 17% eliminated. Targets the EU’s INR 8.71 Lakh Crore (USD 100 billion) import market.
• Gems and Jewellery: Preferential access across 100% of trade value, improving competitiveness in a USD 79.2 billion market.

Agriculture and Processed Foods

The FTA aims to elevate the global competitiveness of Indian agricultural products while protecting domestic interests.

• Export Growth: Enhanced access for tea, coffee, spices, fresh fruits (grapes), and vegetables (gherkins, cucumbers).
• Strategic Safeguards: India has excluded sensitive sectors from liberalization, including dairy, cereals, poultry, and soymeal.

High-Growth and Technical Sectors

• Marine Products: Reducing tariffs of up to 26% to unlock the EU's USD 53.6 billion marine market.
• Engineering and Chemicals: Zero duty on 97.5% of India’s chemical export basket. Engineering goods, currently facing tariffs up to 22%, will gain preferential access.
• Medical Instruments: Elimination of tariffs (up to 6.7%) across 99.1% of trade lines for lenses, spectacles, and medical devices.

Services and Professional Mobility

Services are identified as the primary future growth driver for both economies.

Commitments and Access

• EU Commitments: Deeper access across 144 subsectors, including IT/ITeS, education, and professional services.
• India Commitments: 102 subsectors covering EU priorities like maritime, financial, and environmental services.
• AYUSH/Traditional Medicine: The FTA locks in the openness of the EU for AYUSH wellness centers. Practitioners can use Indian qualifications in EU states where regulations do not currently exist.

Mobility Framework

• Temporary Entry: Assured regimes for Business Visitors, Intra-Corporate Transferees (and their families), and Independent Professionals.
• Social Security: Agreement to work toward Social Security Agreements with all EU Member States within five years.
• Education: A conducive framework for Indian students regarding entry and post-study work visas.

Regulatory and Technical Frameworks

Rules of Origin and Compliance

• Product Specific Rules (PSRs): Aligned with existing supply chains to ensure substantial processing while allowing flexibility for sourcing global inputs.
• Ease of Doing Business: Introduction of self-certification through a "Statement on Origin" to reduce compliance costs and time.
• MSME Support: Specific quotas for shrimps, prawns, and downstream aluminium products to help MSMEs source non-originating inputs.

Intellectual Property Rights (IPR)

• Reinforcement: Affirms TRIPS and the Doha Declaration.
• Digital Libraries: Recognizes India’s Traditional Knowledge Digital Library (TKDL) project.
• Technology Transfer: Establishes mechanisms for exchanging views on technology transfer and business partnerships.

Sanitary and Phytosanitary (SPS) & Technical Barriers to Trade (TBT)

• Cooperation: Facilitates recognition of conformity assessment results and equivalence on SPS measures based on technical justification.
• Digitization: Aims to reduce trade barriers through information sharing and adherence to international standards.

 Note: This factsheet is for informational purposes and may undergo further modifications during legal revision and final approval processes.