Story to this point: Negotiations on the India-European Union Free Commerce Settlement (FTA), dubbed the “mom of all agreements” by each leaders, formally concluded on January 27, bringing an finish to just about 20 years of on-and-off negotiations. The settlement can be a win-win for either side, securing favorable concessions in most different areas whereas avoiding intractable and delicate points.
Why is it the “mom of all trades”?
FTAs are so known as due to the scale of the economies, markets, and bilateral commerce concerned. The settlement combines the second and fourth largest single customs territories, with a mixed market measurement estimated by the Indian authorities at 2,091.6 billion rupees, or about $24 trillion. India has concluded round eight FTAs prior to now 4 years. The opposite eight FTAs collectively accounted for about 16% of India’s whole commerce in 2024-25, whereas the EU itself accounted for almost 12% within the newest full-year information out there. Bilateral commerce in items between India and the EU will attain 11.5 billion rupees ($136.54 billion) in 2024-25, of which Indian exports accounted for about 6.4 billion rupees ($75.85 billion). India-EU companies commerce reached 7.2 billion rupees ($83.1 billion) in 2024.
What’s India getting?
Detailed FTA paperwork haven’t but been made public, and knowledge is simply out there by authorities bulletins from either side. Beneath the settlement, the EU will remove duties on roughly 70.4% of the tariff strains instantly after the settlement enters into drive, protecting almost 90.7% of India’s exports. Tariffs on an additional 20.3% of merchandise that account for two.9% of India’s exports, together with sure marine merchandise, processed meals, and arms and ammunition, will probably be eradicated over three to 5 years after implementation. Moreover, the 6.1% tariff bracket, which covers 6% of India’s exports, will scale back however not remove tariffs on sure poultry merchandise, preserved greens, bakery merchandise, and so on., and scale back them by quota-based tariffs on automobiles, metal, sure shrimp and shrimp merchandise, and so on. Because of this EU tariff concessions cowl greater than 99% of India’s commerce exports to the area. The advantages supplied are usually not restricted to merchandise. Though the companies sector has not seen as vast a gap as items, the federal government mentioned the EU is delivering “broader and deeper commitments” throughout 144 service subsectors, together with IT/ITeS, skilled companies, training and different enterprise companies.
Which areas will profit?
Commerce Minister Piyush Goyal mentioned: “The potential (of the EU FTA) within the labor-intensive sectors, the place we’re successful large, is about $35 billion. Of that $35 billion, $33.5 billion can have zero % tariffs from day one.” hinduism He mentioned this in an interview after the negotiations ended. These sectors, which embody textiles, attire, marine, leather-based, footwear, chemical compounds, plastics/rubber, sporting items, toys, and gems and jewelry, are at present topic to tariffs starting from 4% to 26%. That is notably noteworthy as these are the sectors primarily affected by the 50% tariff imposed by the US on imports from India. “Preferential market entry for agricultural and processed meals reminiscent of tea, espresso, spices, grapes, cucumbers, cucumbers, dried onions, recent greens and fruit will additional enhance their competitiveness throughout the EU,” the federal government mentioned in an announcement. The FTA can be anticipated to profit India’s conventional medication companies and well being employees, it added. In keeping with the settlement, AYUSH practitioners will have the ability to use their {qualifications} obtained in India to supply companies in EU nations the place no regulation exists.
What has India supplied the EU?
Beneath this settlement, tariffs on roughly 49.6% of the tariff gadgets, which cowl 30.6% of commerce worth, will probably be eradicated instantly after the settlement takes impact. An additional 39.5% of the 63.1% of commerce worth gadgets can have their tariffs eradicated inside 5, seven or 10 years from the settlement’s entry into drive. Taken collectively, India’s whole proposal would cowl roughly 92.1% of the tariff line and 97.5% of the commerce worth.
Though many European items are set to turn into cheaper for Indians, the principle gadgets of curiosity for customers are wine and vehicles. For European wines, the present tariff of round 150% will probably be regularly lowered over seven years, with the minimize to 30% for wines priced between 2.5 and 10 euros and 20% for wines priced above 10 euros. No concessions are supplied for cheaper wines to guard home producers. All of those tariffs are utilized based mostly on quotas, however quantities in extra of quotas are topic to non-FTA tariffs. Automobile tariffs will probably be decreased from the present 110% to 10% in phases, however a quota system will even be utilized. Autos priced under 2.5 million rupees, which make up the majority of the Indian market, are usually not lined by the deal. Autos exceeding that restrict will probably be break up into three quotas. The bottom of those brackets has the least allocation to European vehicles, as Indian producers have a powerful presence in European vehicles. The ultra-luxury phase has the biggest quota for European vehicles, as European automakers don’t compete with India.
Which sectors are excluded from the settlement?
In an interview, Goyal defined that each one FTA negotiations start by presenting “purple strains” or sectors the place each nations is not going to provide any concessions. Due to this fact, underneath the EU settlement, India has managed to exclude delicate agricultural sectors reminiscent of beef, poultry, dairy merchandise, seafood, grains, particularly rice and wheat, vegetables and fruit, nuts, edible oils, tea, espresso, spices and tobacco. The EU has excluded beef, sugar, rice, poultry, milk powder, honey, bananas, smooth wheat, garlic and ethanol from the deal, however has supplied quotas for sheep and goat meat, candy corn, grapes, cucumbers, dried onions, rum created from molasses and starch. Goyal expressed confidence that the settlement will probably be carried out in calendar 12 months 2026, regardless that the doc nonetheless must endure authorized evaluation, be translated into 24 European languages, authorised by 27 European nations and finally handed by the European Parliament.
What are your issues?
The FTA didn’t make a lot progress in addressing the Carbon Border Adjustment Mechanism (CBAM), a tariff system designed by the EU to deal with the carbon emissions of nations and corporations. The EU argued that CBAM tariffs apply equally to all nations and can’t be compromised to any explicit nation. Nevertheless, India has secured an enterprise that if the EU grants CBAM concessions to different nations, they are going to robotically apply to India as properly.
One other concern is that if India is to draw funding from nations seeking to reap the benefits of new tariff-free routes to Europe, it must urgently implement additional reforms to make India extra investment-friendly.
issued – February 1, 2026 2:46 AM IST
