New Delhi: India and the European Union (EU) have sealed the long-awaited Free Trade Agreement (FTA), with Prime Minister Narendra Modi announcing the breakthrough on Monday. The formal signing of the pact is expected to take place in around six months, after the text undergoes legal vetting, while the agreement is likely to come into force sometime next year, according to The Financial Express.
The India–EU FTA is seen as a major strategic and economic milestone, covering two large economies with a combined population of nearly two billion. The agreement aims to significantly boost bilateral trade and investment at a time when global trade flows are under strain, particularly due to rising protectionism and higher tariffs imposed by the United States.
India is currently facing import tariffs of up to 50 per cent in the US market. Once implemented, the FTA is expected to help Indian exporters diversify shipments, reduce dependence on China, and improve access to one of the world’s largest consumer markets, making the timing of the deal especially critical for New Delhi.
The pact also comes against the backdrop of the European Union’s suspension of the Generalised System of Preferences (GSP) benefits for India, which earlier allowed several Indian products to enter Europe at concessional duties. The new FTA is expected to bridge that gap and help Indian exporters remain competitive in the EU market.
Under the agreement, both sides have committed to lowering import duties, simplifying trade rules and improving market access for goods and services, which could ease the cost of doing business for companies operating across the two regions.
Sector-wise impact
Indian exporters in labour-intensive sectors such as textiles, clothing and leather goods are expected to be among the biggest beneficiaries. Import duties in the EU, currently around 10 per cent for several of these products, are likely to be reduced, potentially aiding export recovery and supporting job creation.
The automobile sector is also set to see a major impact. India is expected to sharply reduce import duties on cars from as high as 110 per cent to about 40 per cent. This could make European vehicles more affordable for Indian buyers, intensify competition in the domestic market and encourage greater technology sharing and partnerships between Indian and European automakers.
Other sectors likely to gain include pharmaceuticals, industrial goods and food processing. Improved access to the EU market could boost exports of Indian generic medicines, engineering products and processed food items.
The services sector, including IT, financial services and professional services, may also benefit, as the agreement is expected to facilitate greater participation by European firms in India, driving investment flows and cross-border exchange of skills and expertise.
The impact on agriculture is expected to be mixed. While increased access for EU products such as wine and olive oil could pose challenges for certain domestic producers, Indian processed food exports are expected to gain improved entry into European markets.
With negotiations concluded after years of talks, policymakers and industry leaders see the India–EU FTA as a key step in strengthening economic ties, improving supply chain resilience and positioning India more firmly in global trade at a time of shifting geopolitical and economic alignments.>
