INDIA-EU TRADE DEAL: Unlocking Opportunities & Empowering India

-

After 20 years of historic negotiations “The Mother of all Deals” has been finally signed, India and EU finalized a comprehensive Free Trade Pact in 27th January 2026.The deal aims to significantly reduce or eliminate tariffs on more than 90% of the traded goods between the two nations, liberalize services, and deepen economic ties across different sectors like manufacturing, technology, and even climate initiatives.

Together, India and the EU have the access of a market which accounts around 2 billion people and approximately 25% of the Global GDP, making this one deal the mother of all deals as quoted by the President of European Union Ursula Von Der Leyen.


A DEAL DECADES IN THE MAKING: WHY INDIA- EU TALKS FINALLY CLICKED?

When a trade deal takes two decades to negotiate, it’s not because negotiators are slow typers. It’s because the deal sits at the intersection of conflicting economic interests, domestic politics, and shifting global realities. For years, these forces pulled in opposite directions. Eventually, they aligned just enough.

  • The Modular and Pragmatic Approach: The relaunched negotiations in 2022 were more flexible as compare to 2013, also there were creative compromises with tariffs being reduced on “troublesome products” for a specific annual quota i.e. (250,000 on vehicles).
  • De-Risking from China: Many claims have been made that both sides has reassessed their strategic positioning due to China’s growing dominance in critical supply chain.
  • Both regions faced high US tariffs making it geostrategic necessity to secure a massive alternative market.
  • The tariff cuts are STAGED (for 5-10 years) strategically with flexibility clauses and safeguard measures rather than permanently positioning it for a longer duration.

FROM HIGH DUTIES TO OPEN MARKETS: DRAMATIC CUTS IN INDIA EU-TARIFFS


MORE THAN TRADE: WHY THIS AGREEMENT IS ABOUT POWER, NOT JUST TARIFFS

This agreement goes beyond tariff reductions and reflects a strategic realignment in a fragmenting global economy. As globalisation slows and supply chains shift, the India–EU FTA represents a move towards trusted and resilient partnerships rather than open-ended free trade.

For the EU, India offers a stable democratic manufacturing base and an alternative to China-centric supply chains. For India, the EU provides access to advanced technology, green finance, and high-value markets critical for achieving the India@2047 vision.

By strengthening cooperation in sectors like electric vehicles, pharmaceuticals, digital services, and clean energy, the deal transforms economic cooperation into long-term geopolitical leverage.

“BEYOND THE TARIFF TALK: THE OTHER HALF OF THE INDIA–EU AGREEMENT”

  • Services and Digital Trade:

The EU open 144 service sub-sectors—think IT, engineering, education—for Indian providers. India opened up 102 of its own, including maritime, financial, and environmental services. On the digital front, both sides agreed to make digital payments smoother and push for more Fintech innovation, including better access for UPI.

There’s something for AYUSH too: Indian wellness centres can now operate in the EU with some future certainty, and Indian practitioners get to use their home qualifications in places where the EU doesn’t have its own rules.

  • Professional Mobility:

A new visa framework now guarantees smoother movement for short-term business visitors and intra-corporate transferees (ICTs). Plus, if you’re an ICT, your family can join you in the EU—and they can work there too. Both sides are working to wrap up Social Security Agreements within five years, so Indian professionals won’t get hit with double contributions. 

  • Sustainability and Climate:

The deal’s got a whole chapter dedicated to trade and sustainable development, with binding promises on labour rights—like stamping out child and forced labour—and a push for gender equality, especially for women-led MSMEs. 

India also got the EU to promise Most-Favoured-Nation treatment under the Carbon Border Adjustment Mechanism, so India gets the same breaks as any other country. EU’s putting €500 million on the table over two years to help India to make its industries greener.  

  • Regulatory and Protective Measures:

The main trade deal is done, but talks are still on for a separate Geographical Indications Agreement to protect iconic products like Champagne or Darjeeling Tea—from being copied. There’s also a safeguard: if imports suddenly spike, either side can bring back MFN duty levels for up to four years during a 22-year transition. 

On intellectual property, the agreement sticks to TRIPS standards but skips over tougher “TRIPS-plus” data exclusivity rules, so India can keep making affordable generic medicines.

Strategic and Security Partnership Alongside all the trade talk, the EU and India signed a new Security and Defence Partnership to work together on maritime security, cyber-defence, and counter-terrorism. Plus, the deal sets up an EU-India Defence Industry Forum to help both sides develop new tech and cut down their reliance on other countries’ manufacturing.


HIDDEN COST OF FREE TRADE? WHAT ARE CRITICS WORRIED ABOUT?

Despite its scale, the agreement has raised concerns among Indian MSMEs, farmers, and automobile manufacturers, who fear unequal competition with subsidised European producers. 

Many domestic firms worry that their relatively smaller scale of operations and limited access to capital may put them at a disadvantage when competing with well-established EU companies. 

The EU’s stringent environmental, labour, and data regulations could also raise compliance costs for Indian exporters, potentially acting as non-tariff barriers despite formal tariff liberalisation.

There are additional worries regarding job displacement and reduced policy flexibility, particularly in sensitive sectors such as pharmaceuticals and digital services. 

Critics argue that stronger intellectual property protections and tighter regulatory commitments may limit India’s ability to pursue affordable healthcare and data localisation policies in the future. Furthermore, concerns persist over whether the benefits of the agreement will be evenly distributed across regions and social groups.

However, supporters highlight the deal’s phased tariff reductions, safeguard clauses, and review mechanisms, arguing that these provide sufficient room to manage short-term disruptions. They also point to opportunities for increased exports, technology transfer, and integration into global value chains. 

In the long run, proponents believe the agreement could encourage domestic reforms and enhance India’s competitiveness in global markets, provided adequate support is extended to vulnerable sectors.

CONCLUSION: THE REAL TEST BEGINS NOW

Calling this agreement the “Mother of All Deals” is not hyperbole — but its success will depend less on signatures and more on execution. Infrastructure readiness, ease of doing business, skilling the workforce, and regulatory clarity will determine whether India converts market access into meaningful economic transformation.

Equally important will be the government’s ability to support MSMEs and vulnerable sectors during the transition period, ensuring they can adapt to heightened competition rather than be displaced by it.

If implemented strategically, the India–EU FTA could accelerate India’s journey towards becoming a global manufacturing powerhouse, a green technology leader, and a key architect of the post-globalisation trade order. 

The agreement also offers an opportunity to deepen India’s integration into resilient global value chains while promoting sustainable and high-quality growth. 

However, realising these ambitions will require continuous policy coordination, stakeholder engagement, and periodic course correction to ensure that long-term strategic gains outweigh short-term adjustment costs.

“The deal opens the door. What matters now is how India walks through it.”


REFERENCES:

BLOG BY: Akshika Madhukar and Shreya, MCom Students

Comments

Post a Comment

Popular posts from this blog

Real Estate Crisis: Is India Facing A Housing Bubble?

-
Image
Introduction In recent years, the Indian real estate market has been the subject of much debate and speculation. Some experts have raised concerns about the possibility of a bubble, citing factors such as rapid price appreciation, high levels of unsold inventory, and a slowdown in sales. Home prices in almost all large Indian cities are unaffordable. In cities like Mumbai and Gurgaon, buying a home demands decades of savings.  In fact, as The Times of India   reported on June 24, 2025, it would take 109 years of savings for the richest 5 percent of families in Mumbai to be able to buy a home to live in. In Gurgaon it would take 64 years. For Bengaluru and Delhi, the figure was at 36 years and 35 years respectively. Now, these are average numbers, and like all average numbers they hide more than they reveal. Nonetheless, even if it would take half the number of years, the message is simple: Home prices in Indian cities have reached extremely high levels. Why Bubble migh...
Read more

Dominance of Western theories in Academia: A critical analysis

-
Image
  INTRODUCTION In academics, theories serve as the backbone for understanding and interpreting societal, political, economic, and cultural phenomena. However, a closer look at the dominant narratives in academia reveals a significant tilt toward western theories. For decades, western framework has shaped global academic discourse, often sidelining indigenous, non-western, or alternative perspectives. Knowledge is intrinsically connected to power in the sense that the former is a manifestation and exercise of the latter. When transferred to the current idea of the production of valid knowledge, it exposes the colossal influence of eurocentrism and western epistemologies. While western theories have contributed immensely to human knowledge, their dominance raises critical questions about inclusivity, representation, and the universality of knowledge. Understanding the Western dominance The dominance of Western theories in academia can be traced back to colonial history. The p...
Read more

Trump’s “Liberation Day” Tariffs: What Happened, What’s Next, and Why the World is Watching

-
Image
Introduction: The Bold Trade Gamble On April 2, 2025 , former U.S. President Donald Trump , currently running for re-election, declared a bold new economic policy titled “Liberation Day.” It marked the announcement of a massive tariff plan that aimed to reshape the U.S. trade landscape and reduce America's dependence on foreign goods. Here’s what he proposed: ·         A 10% universal tariff on all imports into the U.S. ·         Additional country-specific tariffs : o    China: Up to 60% more , making total duties up to 145% on some goods o    India: +27% o    Japan, Germany, and others: Tariffs ranging from 11% to 50% Trump framed this as a “second American Revolution” —claiming it would bring manufacturing back to U.S. soil, revive American jobs, and end what he calls “economic dependency” on China. Immediate Reactions (April 2–4) 🌍 Global Financial Shock Th...
Read more