A landmark free trade agreement (FTA) between India and the European Union has been finalized, marking a historic milestone in economic relations between the two major trading partners. The comprehensive deal, which will eliminate tariffs on 96% of trade between the regions, was announced during the 16th India-EU Summit.

Deal Structure and Key Points

Prime Minister Narendra Modi emphasized the agreement’s significance, noting that it will create opportunities for 1.4 billion Indians and millions of Europeans. The deal represents a quarter of the global economy and will benefit nearly 2 billion people across both regions.

Under the agreement, Indian textiles, marine products, leather goods, footwear, gems, jewelry, toys, and sports equipment will gain zero-duty access to EU markets. For European imports, India has opted for a phased opening of its market for luxury cars priced above Rs 25 lakh and premium wines costing more than $3-3.25 per bottle, with specific quantity quotas.

Implementation Timeline and Market Access

The agreement requires ratification by all 27 EU member states before implementation, a process expected to take approximately one year. This gradual approach allows industries on both sides to prepare for the new trade landscape.

Current bilateral trade between India and the EU stands at Rs 11.5 lakh crore ($136.54 billion), with Indian exports at Rs 6.4 lakh crore ($75.85 billion) and imports at Rs 5.1 lakh crore ($60.68 billion). Services trade amounts to an additional Rs 7.2 lakh crore ($83.10 billion).

Strategic Benefits and Protections

The agreement includes several strategic provisions:

• Protection for India’s small car market segment
• Visa concessions for students, including post-study work permits
• Safeguards for sensitive sectors like cereals and dairy products
• Framework for digital trade and services

Long-term Economic Impact

While immediate benefits may be limited, the agreement is expected to create substantial long-term opportunities for manufacturers and exporters. The deal goes beyond traditional trade aspects, incorporating provisions for defense cooperation, maritime security, clean energy initiatives, climate action, digital technologies, space exploration, and connectivity.

This comprehensive trade partnership arrives at a crucial time amid global economic uncertainties, positioning both India and the EU for enhanced economic cooperation and strategic alignment in the coming decades.