Why in news?

Negotiations on the India–European Union Free Trade Agreement (FTA) formally concluded on January 27, ending nearly two decades of on-and-off talks.

Often described by leaders on both sides as the “mother of all deals,” the agreement balances ambition with pragmatism—delivering mutual economic benefits by securing key concessions while steering clear of the most politically sensitive and intractable issues.

What’s in Today’s Article?

• Why the India–EU FTA Is Called the ‘Mother of All Deals’?
• What India Gains from the India–EU Free Trade Agreement?
• Sectors Set to Gain Most from the India–EU FTA
• What India Has Offered the EU Under the FTA?
• Which Sectors Are Excluded from the India–EU FTA?
• Key Concerns Around the India–EU FTA

Why the India–EU FTA Is Called the ‘Mother of All Deals’?

• The India–EU FTA earns this tag due to the sheer scale of the economies and trade involved.
• It links the world’s second (EU) - and fourth-largest (India) customs blocs/economy, covering a combined market of about $24 trillion.
• While India’s eight recent FTAs together accounted for around 16% of its trade in 2024–25, the EU alone made up nearly 12%.
• Bilateral merchandise trade reached $136.5 billion, with Indian exports at $75.9 billion, and services trade touched $83.1 billion in 2024—underscoring the deal’s outsized significance.

What India Gains from the India–EU Free Trade Agreement?

• Major Tariff Elimination on Indian Exports - Under the deal, the EU will immediately remove duties on 70.4% of tariff lines, covering about 90.7% of India’s export value once the FTA comes into force.
• Phased Tariff Cuts on Sensitive Products - Another 20.3% of tariff lines—covering 2.9% of exports—will see tariffs eliminated over 3–5 years, including selected marine products, processed foods, and arms and ammunition.
• Partial Reductions and Quota-Based Access - Around 6.1% of tariff lines, accounting for 6% of exports, will see reduced (but not zero) tariffs or quota-based concessions. These apply to items such as poultry, preserved vegetables, bakery products, automobiles, steel, shrimp, and prawns.
• Near-Complete Coverage of Indian Exports - Taken together, EU tariff concessions apply to over 99% of the total value of India’s exports to the bloc, making it one of the most comprehensive market-access packages India has secured.
• Improved Access for Services - Beyond goods, the EU has offered broader and deeper commitments in services across 144 sub-sectors, including IT/ITeS, professional services, education, and other business services.

Sectors Set to Gain Most from the India–EU FTA

• Big Wins for Labour-Intensive Manufacturing - The FTA’s potential gains for labour-intensive sectors are about $35 bn, with $33.5 bn moving to zero duty on Day 1.
  • Beneficiaries include textiles and apparel, marine products, leather and footwear, chemicals, plastics/rubber, sports goods, toys, and gems and jewellery—sectors that currently face 4–26% EU tariffs.
• Relief Amid US Tariff Pressures - These gains are especially significant as many of the same labour-intensive sectors have been hit by high U.S. tariffs on Indian imports, making preferential access to the EU market a timely offset.
• Agriculture and Processed Foods Get Preferential Access - The government said tea, coffee, spices, grapes, gherkins and cucumbers, dried onion, fresh fruits and vegetables, and processed food products will receive preferential access, improving their competitiveness in the EU.
• Opportunities for Traditional Medicine (AYUSH) - The FTA is also expected to benefit AYUSH services. In EU countries without specific regulations, AYUSH practitioners can offer services using qualifications earned in India, expanding professional opportunities abroad.

What India Has Offered the EU Under the FTA?

• Wide-Ranging Tariff Liberalisation - India has agreed to immediately eliminate duties on 49.6% of tariff lines, covering 30.6% of trade value, once the FTA takes effect.
  • A further 39.5% of tariff lines—covering 63.1% of trade value—will see tariffs phased out over 5, 7, or 10 years. Overall, India’s offer spans 92.1% of tariff lines and 97.5% of trade value.
• Cheaper European Goods for Indian Consumers - Many European products will become cheaper in India, with wine and automobiles being the most prominent consumer-facing categories affected by the deal.
• Wine: Phased Cuts with Safeguards - Duties on European wine—currently around 150%—will be reduced over seven years to 30% for wine priced €2.5–€10 and 20% for wine priced above €10.
  • Cheap wine is excluded to protect domestic producers. All concessions apply within quotas; imports beyond quotas face non-FTA tariffs.
• Automobiles: Gradual Cuts, Quota-Based - Tariffs on motor vehicles will be gradually reduced from 110% to 10%, but strictly under a quota system.
  • Cars below ₹25 lakh (the bulk of India’s market) are excluded.
  • Vehicles above this threshold are split into three quota brackets, with smaller quotas where Indian manufacturers compete and larger quotas in the ultra-luxury segment where European makers face little domestic competition.
• Balancing Access and Protection - India’s concessions aim to open markets while protecting sensitive domestic sectors, using phased reductions and quotas to manage competitive pressures.

Which Sectors Are Excluded from the India–EU FTA?

• India kept several sensitive agricultural sectors out of the deal, including beef, poultry, dairy, fish and seafood, cereals (especially rice and wheat), fruits and vegetables, nuts, edible oils, tea, coffee, spices, and tobacco.
• EU’s Exclusions and Limited Quotas
  • The EU, for its part, excluded beef, sugar, rice, chicken meat, milk powder, honey, bananas, soft wheat, garlic, and ethanol.
  • It offered quota-based access (not full liberalisation) for sheep and goat meat, sweetcorn, grapes, cucumbers, dried onions, and rum made from molasses and starches.

Key Concerns Around the India–EU FTA

• One major unresolved issue is the Carbon Border Adjustment Mechanism (CBAM), the EU’s carbon-linked tariff framework.
• The EU argued CBAM applies uniformly to all countries, leaving little room for country-specific concessions.
• However, India secured a most-favoured treatment assurance—any CBAM concession granted to another country would automatically extend to India.
• Investment Climate Pressures
  • Another concern is investment readiness.
  • To capitalise on the tariff-free access to Europe and attract firms relocating supply chains, India will need to accelerate domestic reforms to improve ease of doing business, regulatory certainty, and infrastructure.
• The Bottom Line
  • While the FTA delivers broad market access, CBAM-related costs and the pace of domestic reforms will shape how fully India can convert the agreement into sustained trade and investment gains.