India, EU Seal Historic Trade Pact, “Mother of All Deals” to Reshape Global Commerce

India

India and EU Seal Historic Trade Pact, “Mother of All Deals” to Reshape Global Commerce: India and the European Union (EU) conclusively announced a landmark Free Trade Agreement (FTA). Dubbed the “Mother of All Deals,” this agreement strategically unites the world’s 2nd and 4th largest economies, unlocking a combined market valued at over ₹2091.6 Lakh Crore (USD 24 trillion) and creating unparalleled opportunities for their combined 2 billion citizens.

A Quantum Leap in Strategic Partnership

Consequently, this modern, rules-based pact evolves India-EU relations from a traditional dialogue into a deep, multifaceted partnership. Designed to navigate contemporary global challenges, it immediately establishes a stable and predictable trade environment. This framework empowers Indian businesses, especially MSMEs, to plan long-term, integrate into European value chains, and secure consistent market access amid worldwide economic volatility.

Unprecedented Market Access: The Core of the Deal

Significantly, the FTA delivers extraordinary market penetration. India secures preferential access to the EU across 97% of tariff lines, covering 99.5% of trade value. The breakdown is as follows:

• Immediate Duty Elimination (Day 1): Covers 70.4% of tariff lines (90.7% of export value). Key beneficiaries are labor-intensive sectors: textiles, leather, footwear, tea, coffee, spices, sports goods, toys, gems & jewellery, and select marine products.
• Phased Duty Elimination (3-5 years): Applies to 20.3% of lines (2.9% of export value), including certain marine products, processed foods, and arms.
• Preferential Access via Tariff Reduction/TRQs: Covers 6.1% of lines (6% of export value) for items like poultry, preserved vegetables, bakery products, cars, and steel.

Overall, more than 99% of India’s exports by value gain enhanced market entry. Crucially, the deal protects India’s policy space for sensitive sectors, reinforcing its developmental priorities.

In reciprocity, India offers the EU access to 92.1% of its tariff lines (97.5% of EU export value):

• Immediate Duty Elimination: 49.6% of tariff lines.
• Phased Elimination (5,7,10 years): 39.5% of tariff lines.
• Phased Reduction/TRQs: 3% of products, including apples, pears, peaches, and kiwi fruit.

This access will diversify India’s sources for high-technology goods, reducing input costs, benefiting consumers, and fostering integration into global supply chains.

Sector-by-Sector Transformation: Data-Driven Gains

1. Agriculture & Processed Foods:

• Impact: Significant positive boost for competitiveness of tea, coffee, spices, grapes, gherkins, dried onion, and fruits.
• Safeguards: Sensitive sectors like dairy, cereals, poultry, soymeal, and certain fruits/vegetables are protected.
• Goal: Strengthen farmer incomes, reinforce rural livelihoods, and elevate India as a premium global supplier.

2. Labour-Intensive Champion Sectors:

• Overall Benefit: Sectors worth ₹2.87 Lakh Crore (USD 33 billion) in exports, facing EU duties of 4-26%, gain immediate zero-duty access.
• Textiles & Apparel: Gains zero-duty access against tariffs up to 12%, unlocking the EU’s ₹22.9 Lakh Crore (USD 263.5 billion) import market. Builds on India’s existing ₹62.7 Thousand Crore (USD 7.2 billion) exports to the EU.
• Leather & Footwear: Eliminates tariffs up to 17% across all lines. Boosts India’s ₹20.9 Thousand Crore (USD 2.4 billion) exports into the EU’s ₹8.71 Lakh Crore (USD 100 billion) import market.
• Gems & Jewellery: Preferential access on 100% of trade value, eliminating tariffs up to 4%. Enhances competitiveness of India’s ₹23.5 Thousand Crore (USD 2.7 Billion) exports in the EU’s ₹6.89 Lakh Crore (USD 79.2 billion) market.
• Marine Products: Preferential access on 100% of trade value, reducing tariffs up to 26%. Targets the EU’s ₹4.67 Lakh Crore (USD 53.6 billion) import market, boosting India’s current ₹8,715 Crore (USD 1 billion) exports.

3. Engineering & Industrial Goods:

• Engineering Goods: Preferential access tackles tariffs as high as 22%. Aims to grow India’s ₹1.44 Lakh Crore (USD 16.6 billion) exports into the EU’s ₹174.3 Lakh Crore (USD 2 trillion) import market.
• Chemicals: Zero duty on 97.5% of India’s export basket, eliminating duties up to 12.8%. Targets the EU’s ₹43.57 Lakh Crore (USD 500 billion) chemical import market.
• Plastics & Rubber: Preferential access to the EU’s ₹27.67 Lakh Crore (USD 317.5 billion) import market, boosting India’s ₹20.9 Thousand Crore (USD 2.4 billion) exports.
• Medical Instruments: Tariffs up to 6.7% eliminated on 99.1% of trade lines.
• Mines & Minerals: Zero duty across 100% of tariff lines.

Services & Mobility: The New Frontier

Moreover, the FTA establishes a robust framework for the future of trade—services.

• EU Commitments: Deeper access across 144 services sub-sectors, including IT/ITeS, professional, education, and business services.
• India’s Offer: Covers 102 sub-sectors in professional, business, telecom, maritime, financial, and environmental services.
• Mobility Framework: Ensures temporary entry for Business Visitors, Intra-Corporate Transferees, Contractual Service Suppliers (37 sub-sectors), and Independent Professionals (17 sub-sectors like IT, R&D). The pact also outlines a constructive path for Social Security Agreements and favorable terms for Indian students.

Innovation, Tradition, and Smooth Trade

• Traditional Medicine (AYUSH): Provides a framework for AYUSH practitioners to offer services and establish wellness centers/clinics in the EU.
• Intellectual Property: Reinforces TRIPS-compliant protections, affirms the Doha Declaration, and recognizes India’s Traditional Knowledge Digital Library (TKDL).
• SPS/TBT Measures: Enhances cooperation to facilitate recognition of conformity assessments, ensure equivalence on food safety measures, and reduce technical barriers through digitization.

The Bottom Line: Empowering India@2047

Ultimately, this FTA is a strategic cornerstone for India’s ‘Empowerment @2047’ vision. With current bilateral trade at ₹11.5 Lakh Crore (USD 136.54 billion) in goods (2024-25) and ₹7.2 Lakh Crore (USD 83.10 billion) in services (2024), the deal taps into vast, unexplored potential. By empowering MSMEs, securing livelihoods, and positioning India as a trusted, high-value partner in one of the world’s richest markets, this “Mother of All Deals” promises to fuel decades of shared, innovation-led growth between two democratic giants.