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India–European Union Free Trade Agreement (FTA)

29 Jan 2026 GS 3 Economy
India–European Union Free Trade Agreement (FTA) Click to view full image

Why in news

India and the European Union have concluded negotiations on a comprehensive Free Trade Agreement after nearly two decades, calling it India’s largest-ever FTA.

Both economies  together accounted for nearly 25% of the global GDP.

Background

  • India–EU FTA talks launched: 2007

  • Negotiations suspended: 2013

  • Talks revived: 2022

  • Agreement concluded: 2026

  • Ratification pending after legal scrubbing, translation, and approval by European Parliament

Trade Profile India–EU

  • Bilateral merchandise trade (2024-25):

    • INR 11.5 Lakh Crore (USD 136.54 billion)

  • India’s exports to EU:

    • INR 6.4 Lakh Crore (USD 75.85 billion)

  • Trade in services (2024):

    • INR 7.2 Lakh Crore (USD 83.10 billion)

Key economic features

Market access

  • EU to eliminate tariffs on 99.5% of Indian exports

  • India to offer tariff concessions on 97.5% of EU imports

Indian exports gaining maximum benefit

  • Immediate (Day-1) duty elimination (90.7%):

    • Textiles and apparel

    • Leather and footwear

    • Gems and jewellery

    • Tea, coffee, spices

    • Toys and sports goods

    • Marine products

  • Phased elimination (3–5 years):

    • Certain marine and processed food products

    • Arms and ammunition

Labour-intensive advantage

  • Over ₹2.87 lakh crore ($33 billion) worth of exports to gain zero-duty access

  • Sectors currently facing 4–26% EU tariffs become more competitive

Concessions by India

Goods

  • Immediate tariff elimination: ~49.6% tariff lines

  • Phased elimination (5–10 years): ~39.5%

  • Duty-free or reduced access for:

    • Machinery and electrical equipment

    • Aircraft and spacecraft

    • Pharmaceuticals

    • Chemicals

    • Motor vehicles

    • Medical and surgical instruments

Automobiles and wine

  • European cars priced above ₹25 lakh:

    • Import duty reduced from 110% to ~10%

    • Subject to quota restrictions

  • Wine imports also under quota-based liberalisation

Protected / excluded sectors

India

  • Dairy sector

  • Sensitive agricultural products

European Union

  • Beef, sugar, rice, chicken meat

  • Milk powder, honey, bananas

  • Soft wheat, garlic, ethanol

Services trade

EU commitments

  • 144 services sub-sectors, including:

    • IT/ITeS

    • Professional services

    • Education

    • Business services

India commitments

  • 102 services sub-sectors, covering:

    • Telecommunications

    • Maritime services

    • Financial services

    • Environmental services

Intellectual Property Rights

  • Reinforces TRIPS protections

  • Covers:

    • Copyright

    • Trademarks

    • Designs

    • Trade secrets

    • Plant varieties

  • Affirms Doha Declaration

  • Recognises Traditional Knowledge Digital Library (TKDL)

  • Promotes technology transfer and business partnerships

Strategic and geopolitical significance

  • India and EU together account for ~33% of global trade

  • Seen as a response to:

    • Fragmenting global trade

    • Uncertainty due to US tariff policies

Carbon Border Adjustment Mechanism (CBAM)

  • Limited agreement reached on Carbon Border Adjustment Mechanism

  • Key outcomes:

    • Accreditation pathway for Indian carbon verifiers

    • Automatic extension to India if EU grants CBAM concessions to any third country

Defence, security and mobility cooperation

  • New India–EU Security and Defence Partnership

  • Cooperation areas:

    • Counter-terrorism

    • Maritime security

    • Cybersecurity

  • Talks launched on Security of Information Agreement

  • Framework enables Indian firms to access EU defence initiatives

Prelims Practice MCQs

Q. With reference to the India–EU Free Trade Agreement, consider the following statements:

  1. The EU will eliminate tariffs on more than 99% of Indian exports.

  2. India has completely opened its dairy sector under the agreement.

  3. Most labour-intensive Indian exports will get zero-duty access from the first day.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer: (b)

Explanation:
Statement 1 is correct (99.5% tariff elimination).
Statement 2 is incorrect (India’s dairy sector remains protected).
Statement 3 is correct (90.7% of exports get day-one duty elimination).

Q. The Carbon Border Adjustment Mechanism (CBAM), recently discussed in India–EU FTA negotiations, primarily aims to:

(a) Subsidise green exports from developing countries
(b) Impose carbon-linked tariffs on imports into the EU
(c) Replace EU Emissions Trading System
(d) Promote voluntary carbon markets globally

Answer: (b)

Explanation:
CBAM is designed to impose a carbon cost on imports into the EU to prevent carbon leakage and ensure fair competition.

Q. Which of the following sectors is explicitly excluded from tariff elimination by the European Union under the India–EU FTA?

(a) Textiles
(b) Marine products
(c) Beef
(d) Gems and jewellery

Answer: (c)

Explanation:
The EU retains tariffs on sensitive agricultural products including beef, sugar, rice, and certain food items.



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