India–EU Free Trade Agreement Sealed: A Landmark Boost for Exports Amid Global Trade Tensions
India and the European Union have formally concluded a long-awaited free trade agreement (FTA), calling it a “landmark” pact that could significantly reshape bilateral trade ties. Prime Minister Narendra Modi described the deal as the “mother of all agreements,” underlining its strategic importance at a time when global trade is facing heightened uncertainty.
The agreement comes as India looks to diversify its export markets following the imposition of steep tariffs by the United States last year. With the EU representing nearly 25% of global GDP and about one-third of global trade, the deal offers Indian exporters access to one of the world’s largest and most affluent markets.
A Market of Two Billion People
The India–EU FTA is expected to create a combined market of nearly 2 billion consumers, strengthening economic cooperation between the two partners. According to Prime Minister Modi, the pact will complement India’s recent trade agreements with the United Kingdom and the European Free Trade Association, further broadening the country’s global trade footprint.
Addressing industry stakeholders, Modi highlighted that labor-intensive sectors stand to gain the most from the agreement.
Key Indian Sectors Likely to Benefit
- Textiles and garments
- Gems and jewelry
- Leather goods and footwear
- Engineering and manufacturing exports
Lower tariffs, improved market access, and streamlined trade rules are expected to enhance the competitiveness of Indian products across Europe.
Strategic Timing Amid U.S. Tariffs
The timing of the deal is critical for New Delhi. Since August last year, Indian exports to the U.S. have been impacted by punitive tariffs of up to 50% on select goods. As the U.S. remains India’s largest export destination, the tariffs have pushed policymakers to actively pursue alternative markets.
This agreement marks India’s fourth major trade pact since those tariffs were imposed, following deals with the U.K., Oman, and New Zealand. While experts note that the EU deal cannot fully replace the scale of trade with the U.S., it provides a vital cushion against external shocks.
Current Trade Snapshot: India and the EU
Trade flows between India and the EU have been steadily growing. In 2024, total goods trade between the two stood at over €120 billion (approximately $140 billion), making the EU India’s largest trading partner.
India’s Major Exports to the EU
- Machinery and appliances
- Chemicals
- Base metals
- Mineral products
- Textiles
On the other hand, the EU’s exports to India are dominated by machinery, transport equipment, and chemical products.
Despite this strong linkage, India accounts for only 2.4% of the EU’s total goods trade, far behind the bloc’s largest partners such as the U.S. and China. Analysts believe the new FTA could gradually narrow this gap.
Trade Balance and Future Outlook
In 2024, India recorded a goods trade surplus of $45.8 billion with the U.S., compared with a lower surplus of $25.8 billion with the EU. While the U.S. remains irreplaceable in the near term, improved access to European markets could help India rebalance its export strategy.
European leaders have emphasized a renewed focus on cooperation, sustainability, and fair trade, signaling a favorable environment for long-term India–EU economic engagement.
Details of tariff reductions, services access, and regulatory alignment are expected to be unveiled following the India–EU summit, where both sides are set to issue a joint statement.
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