During a high-level meeting in New Delhi, the long-awaited Free Trade Agreement (FTA) between India and the European Union (EU), which was waiting to be finalized for the last two decades, was finally finalized. This agreement is being called the “Mother of All Deals” due to its comprehensiveness and strategic importance. The European Union is India’s largest trading partner, accounting for about 17 percent of India’s total global trade with the EU alone, which further increases the importance of this agreement.
Surplus trade with EU
According to the data, the total trade between India and the EU was around $136.53 billion in the financial year 2024-25. Of this, India’s imports from the EU were approximately $60.68 billion, while India’s exports to the EU were approximately $75.85 billion. Thus, India achieved a trade surplus of approximately $15.17 billion with the EU, indicating a strong position for Indian exporters. India-EU relations are strong not only in the goods but also in the services sector. In 2024, trade in services between the two countries is expected to reach approximately $83.10 billion, with IT services, business services and telecommunications making significant contributions. It is expected that with the implementation of the new FTA, trade barriers will reduce in the coming years, investment will increase and India-EU economic relations will deepen. Let’s see what changes are expected after the implementation of the historic FTA with the EU:
Electronics, Textiles and Direct Market Access
Many important changes are expected after the implementation of the historic free trade agreement with the EU. This agreement will have the most direct impact on market access in the electronics, textile and other manufacturing sectors. Especially, reduction in custom duty on goods will make Indian products more competitive in the European market, which is expected to give a big boost to exports.
At present, about 10 percent custom duty is imposed on Indian clothes in the European Union, which has been a big challenge for Indian exporters. Under the FTA, it is expected that this duty will be gradually reduced. This will not only make Indian clothes cheaper but will also increase their demand in Europe. Its direct benefit will be that Indian exporters will be in a better position than countries like Bangladesh and Vietnam and will be able to strengthen their share in the European market.
cars will become cheaper
The automobile sector is being discussed the most in the India-EU FTA, as the Indian car market is considered one of the most secure markets in the world. Currently, cars imported from Europe attract 70 to 100 percent import duty depending on the model and price. This makes European luxury and premium cars too expensive for Indian customers, limiting their accessibility.
According to reports, this situation may change significantly after the implementation of FTA. The Indian government has agreed to initially reduce import duty on high-end cars priced above ₹1.6 million (by about 40%). This could make European cars more affordable, giving Indian customers more choices. Apart from this, this will increase competition in the Indian auto sector and will put pressure on domestic companies to further improve technology, quality and innovation.
