India – EU Trade Agreement: What the Mega Agreement Means for Exports, Jobs, and Prices

The India EU trade deal, recently concluded, is already being referred to as the “mother of all deals” because of its scale and strategic importance. This Free Trade Agreement (FTA) connects two of the world’s largest economies, India and the European Union, under a single, modern trade framework. 

The deal aims to provide predictable access, lower costs, and long-term certainty for trade. It spans trade in goods and services, market access, mobility of professionals, regulatory cooperation, and supply-chain integration. 

Key Highlights of India EU Trade Deal

• Free Trade Agreement (FTA) finalised on 27 January 2026 at the 16th India–EU Summit
• EU to cut or remove tariffs on most Indian exports by value
• Biggest gains for textiles, leather, marine, gems & jewellery, and engineering
• Import duties earlier ranged from 4% to 26% in key sectors
• Strong push for services trade, covering 144 services subsectors
• Includes a temporary mobility framework for professionals
• Sensitive sectors protected: dairy, cereals, poultry, select agri products
• Focus on long-term trade certainty, not short-term tariff cuts

Why Is the India – EU Trade Deal Called the “Mother of All Deals”?

The agreement earns this title because of its scale, scope, and strategic depth.

1. Economic Size: Together, India and the European Union represent nearly USD 24 trillion in combined GDP and a consumer base of around 2 billion people, making this one of the largest trade partnerships globally.

2. Unprecedented Market Access: The EU has agreed to eliminate or reduce tariffs on the majority of Indian exports by value, including labour-intensive sectors such as textiles, leather, gems and jewellery, marine products, and engineering goods. 

3. Education, Business, and IT: It includes deep commitments across IT and IT-enabled services, professional services, education, business services, and digital delivery. It also creates structured pathways for the temporary movement of professionals, an area of long-standing interest for India.

4. Predictability and Stability: Clear rules on standards, regulatory cooperation, intellectual property, and dispute resolution reduce policy risk for businesses planning long-term investments and supply-chain integration between India and Europe.

India EU Trade Deal: Tariff and Price Impact 

By cutting tariffs across most product categories, the FTA directly narrows the price gap between Indian exports and competing suppliers.

Sector / Product Category	EU Import Duty Before FTA	Duty Under India–EU FTA	What Changes After the Deal
Textiles & Apparel	Up to 12%	0% (Immediate)	Indian textiles and garments enter the EU without duties, improving price competitiveness and export volumes
Leather & Footwear	Up to 17%	0% (Immediate)	Major cost reduction for Indian exporters; better margins and stronger EU market share
Marine Products (Shrimp, Fish)	Up to 26%	0% or phased elimination	Indian seafood becomes significantly cheaper in EU markets, boosting coastal exports
Gems & Jewellery	Up to 4%	0%	Removal of duty improves competitiveness in Europe’s large jewellery import market
Engineering Goods	Up to 22%	0% or phased reduction	Indian engineering exports gain price parity with global suppliers in the EU
Chemicals	Up to 12.8%	Zero duty on 97.5% of exports	Lower landed costs expand India’s presence in the EU chemical market
Medical Devices & Instruments	Up to 6.7%	0% on 99.1% of trade lines	Easier and cheaper access for Indian medical products in European healthcare markets
Plastics & Rubber	Varies (mid-single digits)	Preferential / zero duty	Enhanced competitiveness for MSME-driven manufacturing exports
Gems, Toys, Sports Goods	4%–8%	0%	Labour-intensive sectors gain a clear cost advantage over non-FTA suppliers

Sector-Wise Impact: Who Benefits Most from the India EU Trade Deal

The agreement is structured to favour labour-intensive industries, MSMEs, and high-value manufacturing, while safeguarding sensitive domestic areas.

1. Labour-Intensive Sectors

Sectors such as textiles, apparel, leather, footwear, marine products, toys, sports goods, and gems and jewellery see the most immediate gains. Together, these account for over USD 33 billion (₹2.87 lakh crore) of Indian exports that earlier faced EU duties ranging from 4% to 26%.

• Textiles and apparel gain zero-duty access to the EU’s USD 263.5 billion import market, where India currently exports around USD 7.2 billion.
  
• Leather and footwear exports worth USD 2.4 billion benefit from tariff elimination of up to 17%, improving competitiveness in the EU’s USD 100 billion import market.
  
• Gems and jewellery exports of USD 2.7 billion gain preferential access in an EU market importing nearly USD 79 billion annually.
  
• Marine exports see duties of up to 26% removed, unlocking access to the EU’s USD 53.6 billion seafood import market.
  

These sectors are employment-intensive, meaning tariff removal directly supports job creation across MSME clusters in states such as Gujarat, Tamil Nadu, Maharashtra, Kerala, Andhra Pradesh, and West Bengal.

2. Engineering and Manufacturing

India’s engineering exports to the EU stand at USD 16.6 billion, while the EU imports nearly USD 2 trillion worth of engineering goods globally. Earlier tariffs of up to 22% limited India’s share. The FTA improves competitiveness through immediate or phased tariff elimination, enabling:

• Deeper participation in European supply chains
• Long-term manufacturing contracts due to predictable tariffs
• Expansion of MSME-led industrial hubs

3. Chemicals, Plastics, and Rubber

The EU is a USD 500 billion chemical import market. The FTA removes duties on 97.5% of India’s chemical export basket by value, eliminating tariffs of up to 12.8%. India currently exports around USD 2.4 billion worth of chemicals to the EU, indicating significant headroom for growth.

Similarly, Plastics and rubber exports gain preferential access to an EU market worth USD 317.5 billion, strengthening India’s position in downstream manufacturing.

4. Agriculture and Processed Foods

Indian exports such as tea, coffee, spices, grapes, gherkins, dried onion, and processed foods receive preferential access, improving competitiveness in European markets.

At the same time, India has protected sensitive sectors such as dairy, cereals, poultry, and certain fruits and vegetables. This balance ensures export growth without disrupting domestic agriculture.

5. Services and Professionals

Services already account for USD 83.1 billion in India–EU trade.

Under the FTA, the EU has committed to market access across 144 services subsectors, including IT, ITeS, professional services, education, and business services. India has secured structured access for temporary movement of professionals, intra-corporate transferees, and independent service suppliers.

What the India EU Trade Deal Does Not Change?

1. Sensitive Agricultural Sectors 

India has not opened several sensitive farm sectors under the FTA. Products such as:

• Dairy
• Cereals
• Poultry
• Soymeal
• Certain fruits and vegetables

This ensures that domestic farmers are shielded from sudden import competition and that food security concerns are not compromised.

2. Public Interest and Regulation

The FTA explicitly preserves India’s ability to:

• Regulate in public health, environment, and safety
• Support MSMEs and domestic industries
• Maintain standards on food safety and quality

Final Thought

What stands out is the balance the agreement achieves. It opens large European markets to Indian exporters in sectors where India is globally competitive, while safeguarding sensitive areas such as agriculture and automobiles. At the same time, deeper commitments to services, professional mobility, standards, and regulatory cooperation signal a move toward predictable and rules-based economic engagement.

Source: https://www.commerce.gov.in/

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