The India-European Union Free Trade Agreement: A New Trade Frontier
The finalization of the India-EU FTA represents arguably the most significant trade policy development for the Indian economy in decades. By creating a combined market of nearly 2 billion people and bridging the world’s fourth-largest economy with its second-largest economic bloc, the pact aims to double EU exports to India while providing Indian labor-intensive sectors with unprecedented access to the European market. The agreement is structured to phase out tariffs on 99.5% of Indian export value over a seven-year horizon, effectively neutralizing the competitive disadvantage Indian exporters previously faced against zero-tariff nations like Vietnam and Bangladesh.
Sectoral Winners and the Dynamics of Labor-Intensive Exports
The immediate market reaction has been most pronounced in the textiles, apparel, leather, and gems and jewelry sectors. For textiles and garments, which currently face EU duties of 10-12%, the transition to zero-tariff status is projected to increase India’s market share in the EU from 5% to 9%, potentially adding $4.5 billion in annual exports. This shift is not merely a volume play; it allows Indian firms to scale up higher value-added products like knitwear and outerwear with improved price competitiveness
