Why is the India-EU trade agreement significant? | Explained Premium

How much of the trade value of what India exports to the European Union region will the EU’s tariff concessions cover? Which are the sectors besides textiles, apparel, manufactured goods and Indian traditional medicine services that the free trade agreement will help?

The story so far: Negotiations on the India-European Union Free Trade Agreement (FTA) — dubbed the ‘mother of all deals’ by leaders on both sides — officially concluded on January 27, closing about two decades worth of intermittent talks. The deal, which has benefits for both, simultaneously avoids intractable sensitive issues while securing advantageous concessions on most others.

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The FTA has been called thus because of the size of the economies, markets, and bilateral trade involved. The deal brings together the second- and fourth-largest single customs blocs, with the Indian government estimating the combined market size to be ₹2,091.6 lakh crore or about $24 trillion. India has signed about eight FTAs in the last four years. While the other eight FTAs together accounted for about 16% of India’s total trade in 2024-25, in the latest full year of data available, the EU itself accounted for nearly 12%. Bilateral merchandise trade between India and the EU stood at ₹11.5 lakh crore ($136.54 billion) in 2024-25, with Indian exports accounting for about ₹6.4 lakh crore ($75.85 billion) of this. The India-EU trade in services touched ₹7.2 lakh crore ($83.10 billion) in 2024.

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The detailed FTA document has not been made public yet, with information only available through government releases from both sides. Under the deal, the EU will eliminate duties on about 70.4% of tariff lines immediately once the deal comes into effect, covering nearly 90.7% of India’s export value. Another 20.3% of products covering 2.9% of India’s exports will see tariffs eliminated over 3-5 years from implementation for certain marine products, processed food items, arms and ammunition, among others. In addition, 6.1% tariff lines covering 6% of India’s exports will see tariffs reduced, but not eliminated, for certain poultry products, preserved vegetables, bakery products among others or be reduced through quota-based tariffs for cars, steel, certain shrimp and prawns products, among others. So, taken together, the EU’s tariff concessions cover more than 99% of the trade value of what India exports to the region. The concessions offered are not limited to merchandise either. While the services sector has not seen as wide an opening up as merchandise, the EU has offered “broader and deeper commitments” across 144 service sub-sectors, including IT/ITeS, professional services, education, and other business services, the government has said.

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