The conclusion of the India-European Union Free Trade Agreement, aptly described as the “mother of all deals”, marks a watershed moment in the evolving architecture of global trade. At a time when tariff-driven protectionism, particularly emanating from the United States, has disrupted established supply chains and unsettled allies and competitors alike, the India-EU pact stands out as a bold counter-narrative: cooperation over confrontation, integration over isolation. What makes this agreement exceptional is its sheer scale and scope. In a single framework, 28 entities-India and the 27 EU member states-have committed to deep trade liberalisation, strategic cooperation and long-term alignment. Together, they account for nearly a quarter of global GDP and represent a market of two billion people. Few trade agreements in history have matched this magnitude, and fewer still have been concluded in such a fraught geopolitical climate.
In immediate terms, the tariff concessions are substantial. The EU’s decision to reduce or eliminate duties on 99 per cent of Indian exports will provide a powerful boost to labour-intensive sectors such as textiles, apparel, leather, handicrafts, footwear and marine products-areas critical for employment generation in India. For Indian exporters facing shrinking access to the US market due to tariff barriers and trade uncertainty, Europe emerges as a vital compensatory destination as India seeks to offset potential business losses, which could run into billions of dollars, arising from US trade actions.
For the EU, the agreement opens the doors to one of the world’s fastest-growing large markets. While India is currently a net importer in India-EU trade, the overall volume-about USD 136 billion-underscores the depth of existing engagement. Reduced tariffs on European wine, automobiles, chemicals, pharmaceuticals and high-end agricultural and dairy products will enhance competitiveness and expand consumer choice in India. For European producers grappling with sluggish domestic demand and disrupted transatlantic trade relations, India offers scale, growth and long-term stability.
The long-term implications, however, go far beyond tariff arithmetic. Much of Europe is no longer in the mass manufacturing race; it relies on external partners for cost-effective production. India, by contrast, is emerging as a global manufacturing hub, backed by a vast workforce capable of delivering quality products at competitive costs. The agreement can accelerate supply chain realignment, encourage European investment in Indian manufacturing, and deepen India’s integration into global value chains.
Conversely, Europe’s strength lies in advanced technology, high-end manufacturing and defence production. From world-class automobiles to sophisticated defence platforms, including fighter aircraft, EU countries possess capabilities that India seeks as it modernises its economy and armed forces. With relations between Europe and the US under strain, and Russia preoccupied with a prolonged war in Ukraine, the EU has both the incentive and the strategic space to deepen defence and technology partnerships with India. The FTA, complemented by the newly signed security and defence pact, provides an institutional foundation for such cooperation.
Equally significant is the agreement on emerging domains such as artificial intelligence. In an era where AI governance, ethics and standards will shape future competitiveness, India-EU coordination can ensure that innovation is balanced with regulation and that technological advancement supports inclusive growth. On the geopolitical plane, the India-EU compact sends a clear message. A well-knit economic bond among 28 democratic entities also has the potential to translate into deeper defence cooperation and coordinated positions on global platforms. For India, EU support can be leveraged in its fight against terrorism and in advancing reforms of global institutions. Collectively, such alignment can reshape international equations at a time when the old order is visibly fraying. The domestic spillovers should not be underestimated. Increased investment and export opportunities are likely to buoy manufacturing, generate employment and stabilise markets. Unsurprisingly, financial markets are expected to respond positively, encouraging the return of foreign institutional investors and reinforcing economic stability.
Practically, the Indo-EU FTA is a rare win-win in an otherwise unsettled global economy. More importantly, it signals the emergence of new, stronger partnerships capable of shaping a multipolar world order. In the midst of global upheaval, this agreement is not just a trade deal-it is a statement of intent about the future of globalisation itself.
Follow our WhatsApp channel
