India’s biggest trade bet with Europe

Raju Korti
The India EU free trade agreement is being rightly described as a mega deal, not just for its size but for its strategic depth. At its core, an FTA is a simple idea. Countries agree to lower or remove taxes on each other’s goods and services so trade becomes cheaper, smoother and more predictable. What makes this agreement exceptional is its scope. Nearly all Indian exports to the EU will now enter with zero or near-zero tariffs, while India has opened its market wider to Europe than it ever has to any other partner.

For India, the tariff story is central. Today, Indian exporters often lose competitiveness in Europe because their products attract duties that rival suppliers do not face. With 99.5 percent of Indian export items seeing tariffs eliminated by the EU, sectors such as textiles, leather, engineering goods, pharmaceuticals, chemicals and processed foods get an immediate price advantage. In simple terms, Indian products become cheaper on European shelves without cutting margins. This directly improves export earnings and supports jobs.

On the import side, India has agreed to gradually lower tariffs on European goods, including sensitive areas like automobiles, machinery and high-end agri products. Car tariffs, for instance, will fall in stages from extremely high levels to much lower ones over several years. This phased approach matters. It gives Indian industry time to adjust, upgrade technology and become more competitive rather than facing a sudden shock. Cheaper and better-quality machinery and components will also reduce production costs for Indian manufacturers.

The broader economic impact lies in investment and supply chains. European companies are not just looking to sell to India but to manufacture here. With stable rules, tariff certainty and strong intellectual property protection, India becomes a more reliable base for global production. This fits neatly with India’s own goals of expanding manufacturing, integrating with global value chains and moving up the technology ladder.

Services and intellectual property are another quiet but crucial gain. India has long strengths in IT, finance, professional services and maritime services. Better access to the EU services market can help Indian firms scale globally. Stronger IP rules, often seen as favouring advanced economies, also help Indian innovators by protecting their ideas and brands abroad.

The agreement also reflects geopolitical realities. Europe is consciously reducing its dependence on both the US and China. India, with its large market and steady growth, is an obvious partner. For India, the deal signals credibility. Concluding the most ambitious FTA in its history tells global investors that India is open, predictable and willing to play by clear rules.

The US angle is equally important. Washington has traditionally preferred bilateral trade arrangements driven by strategic leverage rather than comprehensive FTAs. India and the US have no full-fledged FTA, partly due to disagreements on tariffs, market access and regulatory standards. In that sense, the India EU deal subtly shifts the balance. It shows India can strike deep trade agreements without aligning fully with US trade preferences. At the same time, it may push the US to rethink its trade engagement with India to avoid being edged out in a key market.

Looking ahead, this FTA is not an end but a roadmap. Its success will depend on implementation. Indian exporters must meet strict European standards on quality, safety and sustainability. Domestic industries must use the transition period to become more competitive rather than protectionist. If managed well, the deal can double trade volumes, deepen industrial capability and anchor India more firmly in the global economy.

In the long run, the India EU FTA positions India as a serious, rules-based trading power. It marks a shift from cautious openness to confident engagement. That may well be its most lasting significance.