Zero tariffs on gems, jewellery, plastic: How will FTA with EU benefit India? ‘Mother of all trade deals’ explained
India-EU FTA discussions concluded: India and the European Union have successfully concluded discussions for the India-EU Free Trade Agreement (FTA). The move is a significant step forward for India’s exports at a time when it is looking to diversify away from the US in the wake of President Donald Trump’s 50% tariffs.At the signing and exchange of the political declaration of the conclusion of negotiations of the India-EU Free Trade Agreement, PM Narendra Modi said, “Yesterday was a historic moment when the European Union leaders took part in India’s Republic Day celebrations for the first time. Today is another such moment, when two major democratic powers are adding a decisive chapter in their relationship….”The European Union ranks among India’s largest trading partners. The bilateral trade between the two in goods and services has risen steadily in recent years. In 2024–25, merchandise trade between the two sides stood at Rs 11.5 lakh crore or $136.54 billion, with Indian exports of Rs 6.4 lakh crore or $75.85 billion and imports worth Rs 5.1 lakh crore or $60.68 billion. Services trade between India and the EU reached Rs 7.2 lakh crore or $83.10 billion during the same period. Together, India and the EU are the fourth- and second-largest economies globally, accounting for about 25% of global GDP and nearly one-third of world trade, positioning the agreement as a platform for unlocking significant trade and investment opportunities between two large and complementary economies.
India-EU FTA: How Does The Trade Deal Benefit India?
- The FTA delivers extensive market access for Indian exports – with over 99% of exports by trade value getting entry into the EU market.
- The India–EU trade agreement aims at deep tariff liberalisation on both sides, with the European Union opening 96.8% of its tariff lines and India 92.1%.
- Labour-intensive industries are set to be among the major beneficiaries, with sectors such as textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles seeing tariffs of up to 10% eliminated on nearly $33 billion of exports upon the agreement’s entry into force.
- The resulting gains are expected to support workers, artisans, women, youth and MSMEs, while embedding Indian firms more firmly within global value chains and reinforcing India’s role as a dependable supplier in international trade.
- Under the deal, India’s tariffs on EU goods will be reduced to zero for 93% of bilateral trade value over a 10-year period, while the EU will phase out tariffs on Indian goods over seven years, excluding sensitive sectors such as automobiles, steel and agriculture.
India will gain flexibility on the EU’s carbon tax regime if similar treatment is extended to other countries, while the EU has committed to uncapped mobility for Indian students. India is also seeking a higher steel export quota as an FTA partner.
