The recently concluded India–European Union Free Trade Agreement (FTA) is expected to deliver benefits well beyond merchandise trade, including higher foreign direct investment (FDI), expanded services trade, labour mobility and strategic diversification, according to a report by HSBC Global Investment Research.
Described as the "mother of all trade deals," the agreement is being seen as balanced, ambitious and mutually beneficial. In FY25, India-EU goods trade stood at nearly $140 billion, built on complementary value chains, with the EU exporting capital goods and industrial inputs such as high-end machinery, electronic components, aircraft and medical devices, while India supplies labour-intensive and consumer-focused products including smartphones, garments, footwear, pharmaceuticals, auto components and diamonds.
The agreement aims to liberalise 92–97 per cent of tariff lines, with officials hoping to double bilateral trade within five years. Labour-intensive Indian exports such as textiles, leather, marine products, gems and jewellery are expected to gain from preferential market access and tariff elimination.
India is also set to sharply reduce import duties on automobiles from 110 per cent to as low as 10 per cent under a quota of 250,000 vehicles, while Indian-made automobiles will gain access to EU markets. Tariffs on EU wine exports will be cut from 150 per cent to 75 per cent initially, with a further reduction to 20 per cent over time. Both sides will receive preferential access to each other's agricultural markets while protecting sensitive sectors, such as dairy in India and poultry and beef in the EU.
Beyond goods, the FTA is expected to enhance services trade, particularly in areas like financial services, while easing mobility norms for labour. Investment flows could also rise due to deeper supply-chain integration and partnerships in strategic sectors such as defence. The growth potential remains significant, as India-EU trade currently accounts for just 0.6 per cent of global trade.
A day after the deal was concluded, US Trade Representative Jamieson Greer said the agreement positions India strongly amid shifting global trade dynamics driven by the United States' evolving economic approach. In an interview with Fox Business, Greer said President Donald Trump's focus on domestic production and tighter market access had pushed major trading partners, particularly the EU, to seek alternative export destinations.
"The EU is turning to India to try to find a place," Greer said, noting Europe's heavy dependence on trade. After reviewing the deal's details, he said India stands to gain significantly, citing greater access to European markets and potential labour mobility provisions. "I think India comes out on top on this, frankly," Greer said, adding that the agreement could usher in a period of strong economic opportunity for India.
The India-EU FTA is among the most ambitious trade agreements negotiated by either side, reflecting years of talks aimed at deepening economic integration and diversifying global trade partnerships.
(With inputs from IANS)
