India–EU FTA could boost trade, diversify markets: Report

A PRF report says the India-EU free trade agreement could significantly boost trade, expand market access, and deepen economic ties. It highlights tariff reductions on 90% of goods, potential export growth for India, and stronger EU engagement in key sectors

New Delhi: Prime Minister Narendra Modi’s recent four-nation tour of Europe, aimed partly at consolidating strategic relations with key European partners amid the changing geopolitical and trading landscape, has a greater significance in terms of diversifying India’s external economic engagement with access to wider markets, according to a new report.

The article by Politeia Research Foundation (PRF) cites the finalisation of the India-EU free trade agreement as a major step forward in the economic partnership.

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“By reducing barriers to goods and services, the agreement can help the EU diversify its partnerships and strengthen its presence in one of the world’s fastest-growing markets, while enabling India to expand exports, attract investment, upgrade its industries and integrate more deeply into global value chains,” the PRF article published in India Narrative states.

It highlights that in 2024, the EU was India’s second-largest trading partner after China, accounting for 11 per cent of India’s total global trade. Meanwhile, India was the EU’s tenth-largest trading partner, accounting for only 1.7 per cent of the EU’s global trade. This shows that while the EU is a major market for India, the latter remains a relatively smaller, though increasingly relevant, partner for the EU.

The EU-India FTA could, therefore, help address this gap by supporting stronger Indian export growth to the EU and by improving market access for EU firms in India.

With a market of close to 1.5 billion people and an expanding middle class, India offers the EU an important source of export diversification and long-term demand growth.

For India, the agreement offers an equally important opportunity. Under the EU-India FTA, the EU has committed to eliminating tariffs on over 90 per cent of tariff lines, covering 91 per cent of the trade value, creating a window for India to drive export growth and increase its share of EU imports.

Overall, the FTA is expected deepen EU penetration in high-value sectors and increase India’s access to advanced technologies and industrial inputs.

The key point is that these provisions reduce the tariff disadvantage faced by Indian exporters in sectors where even small price differences can affect market share, the article points out.

This is particularly relevant for textiles and apparel. Indian exporters have historically faced a tariff disadvantage in the EU compared with competitors such as Bangladesh, Pakistan and Turkey, which benefit from preferential access to the European market.

The FTA helps correct this gap by improving India’s tariff treatment in the EU’s large textile and apparel market. This could support export diversification while strengthening one of India’s most employment-intensive sectors, which is closely linked to MSME clusters and regional production networks. The potential gains are therefore not only commercial but also developmental, given the sector’s role in job creation and small-firm participation, the article points out.

It further underscores that the EU-India FTA provides specific commitments on trade in services between the two regions. This is particularly relevant for India, whose comparative strength in ICT and business services gives services trade a central role in its economic relationship with the EU.

Besides, the agreement could also support the expansion of Global Capability Centres in India by improving predictability for cross-border services supply and strengthening links between Indian service providers and European clients.