Shift in trade winds

What the EU-India free trade agreement offers to reinforce trust in rules-based global order

- PUJA DAS

AFTER NEARLY two decades of negotiations, on January 27 India and the EU signed a robust free trade agreement (FTA), allowing for closer trade ties. The India-EU Trade Deal, expected to benefit 2 billion people, will likely be rolled out in early 2027, after approval from the Indian Cabinet, European Parliament and the Council of the European Union.

While the FTA saw intermittent negotiations over the years, the vigour to reach an agreement rose in 2022. Its finalisation now appears to be a hedge against renewed US protectionism. India faces steep US tariffs since mid-2025, with labour-intensive sectors warning of permanent market loss. EU-US trade relations also remain volatile despite a limited framework agreement. The pact also strengthens the EU's Indo-Pacific strategy and reduces reliance on China.

After signing the FTA at the 16th India-EU Summit in Delhi, Ursula von der Leyen, President, European Commission, said the deal sends a message that "rules-based cooperation still delivers great outcomes". Prime Minister Narendra Modi added that the FTA will boost manufacturing and expand services-related sectors in India.

Preferential market access on both sides remains the focus, with duty reduction or elimination across tariff lines. According to a factsheet on the FTA released by the Union Ministry of Commerce, the deal delivers unprecedented market access for more than 99 per cent of India's export by trade value.

Key labour-intensive sectors such as textiles, apparel, marine products, leather and footwear, gems and jewellery, which account for 70.4 per cent of India's tariff lines, will see immediate duty elimination. Certain marine products, processed food items, arms and ammunition, (20.3 per cent tariff lines), will see duty reduced to zero over three-five years.