Background
India and the European Union resumed negotiations on a comprehensive Free Trade Agreement after a prolonged pause, driven by global supply-chain disruptions, geopolitical uncertainty, and the need for economic diversification. The FTA marks a shift from a largely transactional relationship to a strategic economic partnership.
The European Union is India’s largest trading partner in goods, while India is among the EU’s fastest-growing major partners. The agreement is positioned not merely as a trade deal, but as a pillar of strategic realignment in a multipolar world.
Evolution of India–EU Economic Relations
- 1990s–2004: Engagement based on trade, development cooperation, and democratic values; Strategic Partnership established in 2004
- 2005–2013: Launch of Broad-based Trade and Investment Agreement (BTIA); talks stalled due to regulatory divergence and political inertia
- 2014–2019: Strategic drift as both sides focused on other partnerships
- 2020–2024: Re-engagement driven by COVID-19, China-related risks, and supply-chain resilience
- 2025 onwards: Strategic consolidation through FTA, defence cooperation, and technology partnerships
Key Provisions of the India–EU FTA
Goods Trade
- Preferential access for nearly all Indian exports to the EU by value
- Immediate zero-duty access for several labour-intensive sectors
- Phased tariff reduction for sensitive products
- Use of tariff rate quotas for automobiles, steel, and selected agricultural products
- Electric vehicles excluded from tariff concessions
Market Access for EU Exports
- Gradual tariff liberalisation by India across most industrial tariff lines
- Phased reduction timelines to protect domestic manufacturing
- Controlled access in agriculture to safeguard food security
Rules of Origin
- Product-specific rules to prevent trade deflection
- Flexibility in sourcing non-originating inputs
- Self-certification mechanisms to reduce compliance costs, benefiting MSMEs
Services Trade
- EU commitments in a wide range of services including IT, professional services, business services, and education
- Predictable regulatory treatment and non-discrimination
- India’s commitments focus on attracting high-technology and capital-intensive services
Mobility of Professionals
- Framework covering intra-corporate transferees, contractual service suppliers, and independent professionals
- Provisions for dependents and family members
- Student mobility and post-study work facilitation
- Scope for recognition of Indian professional qualifications in select sectors
Non-Tariff Barriers
- Cooperation on customs procedures, sanitary and phytosanitary standards, and technical barriers to trade
- Greater regulatory transparency to address compliance challenges faced by Indian exporters
Climate and Trade Interface (CBAM)
- Assurance of non-discriminatory treatment under EU’s carbon border measures
- Commitment to dialogue on climate-trade issues
- Recognition of development priorities while engaging on climate standards
Areas of Convergence
Strategic Autonomy
- Shared preference for a multipolar, rules-based order
- Resistance to rigid alliance structures
Supply-Chain Resilience
- Joint interest in de-risking from over-concentrated manufacturing hubs
- India offers scale and workforce; EU provides capital and technology
Technology Governance
- Cooperation on AI, semiconductors, cyber norms, and digital public infrastructure
- Institutionalised through the Trade and Technology Council
Maritime Security and Indo-Pacific
- Convergence on freedom of navigation and secure sea lanes
- Cooperation in maritime domain awareness and cyber security
Multilateralism
- Coordination in forums such as G20, WTO reform discussions, and climate negotiations
Key Areas of Divergence
Carbon Border Adjustment Mechanism (CBAM)
- India views CBAM as a trade-restrictive measure that undermines developmental equity
- Concerns over erosion of export competitiveness
Russia–Ukraine Conflict
- EU favours sanctions-based alignment
- India maintains strategic autonomy citing energy security
Data Governance
- Divergence between EU’s data protection standards and India’s data governance framework
- Lack of mutual data adequacy recognition raises compliance costs for Indian firms
Labour Mobility
- EU preference for temporary migration contrasts with India’s demand for greater professional mobility
- Non-recognition of qualifications remains a barrier
WTO Reform and Agricultural Subsidies
- EU challenges India’s food security programmes at the WTO
- Differences on special and differential treatment for developing countries
Significance of the FTA for India
- Enhanced access to the world’s largest single market
- Boost to exports, especially in labour-intensive and services sectors
- Greater integration into global value chains
- Strategic leverage amid shifting global trade patterns
- Support for India’s broader economic and geopolitical aspirations
Way Forward
- Align climate action with trade competitiveness through cooperative mechanisms
- Build trust on data governance through sector-specific or zonal solutions
- Deepen cooperation in third-country infrastructure and development projects
- Strengthen institutional mechanisms to manage disputes and divergences
Conclusion
The India–EU Free Trade Agreement represents a structural shift in India’s trade and foreign policy approach. Beyond tariff liberalisation, it embeds trade within a broader framework of strategic autonomy, resilience, and rules-based global engagement. Its success will depend on managing divergences pragmatically while leveraging shared interests in an increasingly fragmented global order.
