‘Mother of all deals’: India and the EU finalise FTA

“mother of all deals”

After almost two decades of negotiation, India and the European Union (EU) finalised a free trade agreement (FTA) on Tuesday, 

FOR INDIA 

billed as the “mother of all deals”, that will see the EU drop tariffs on 99.5% of Indian exports to the 27-nation bloc.

FOR EU 

India has given tariff concessions on 97.5% of imports from the EU, with European wines and luxury cars set to become less expensive here as a result.

a third of global trade 

Beyond the economics, both sides stressed the geopolitical significance of a deal between two economies that together account for a third of global trade in the shadow of uncertainty sparked by the U.S. tariff regime.

‘Largest-ever FTA’

 exclude their respective sensitive sectors

NO RELIEF FROM INDIA 

India’s strategic agricultural and dairy sectors remain protected, 

NO RELIEF FROM EU

EU will maintain its current tariffs on beef, sugar, rice, chicken meat, milk powder, honey, bananas, soft wheat, garlic, and ethanol.

HISTORY OF TALKS 

 The two sides began discussions on the trade deal in 2007 but suspended the negotiation in 2013, 

and the talks were relaunched in 2022 as India and the EU began reorienting policies in the post-COVID-19 scenario. 

 Following several hiccups and pauses, they were resumed in 2022 with both sides agreeing to exclude issues on which agreement had been elusive.

ratified by the European Parliament

According to Commerce Ministry officials, the language in the document will first be cleaned up over the next 10 to 15 days,

 It will then have to be translated and sent to all 27 EU member states, before it can be ratified by the European Parliament. 

“We do hope that we should be able to celebrate the entry into force of this agreement within calendar 2026 itself,” said Union Minister Piyush Goyal.

PROFIT FOR INDIA 

According to the Commerce Ministry, India has gained tariff reductions across 97% of tariff lines, covering 99.5% of trade value. 

Of this, 90.7% of India’s exports will see duties eliminated entirely on the first day of the deal’s implementation, including labour-intensive sectors such as 

• textiles, 
• apparel, 
• leather, 
• footwear, 
• tea, 
• coffee, 
• spices, 
• sports goods, 
• toys, 
• gems and jewellery, 
• marine products

Another 2.9% of India’s exports will see duty elimination over three to five years.

This would include certain 

• marine products, 
• processed food items, 
• and arms and ammunition. 

Over and above this, 6% of India’s exports will see tariff reductions including certain 

• poultry products, 
• preserved vegetables, 
• bakery products

LOSS IN PAST FOR INDIA 

“Key labour-intensive sectors comprising more than ₹2.87 lakh crore [$33 billion] of exports that are currently subjected to import duty between 4% to 26% in the EU and are crucial for employment generation, 

will enter zero duty from entry into force of the FTA and thus gain enhanced competitiveness in the EU market,” the Ministry said in a release.

Duty elimination

INDIAN EXPORT 

In particular, of the sectors that India primarily exports to the EU, the following will see duties eliminated entirely: 

• marine products (current duties of up to 26%), 
• chemicals (12.8% currently), 
• plastic and rubber items (6.5%), 
• leather footwear (17%), 
• textiles and apparel (12% each), 
• base metals (10%), 
• gems and jewellery (4%), 
• furniture and allied consumer goods (10.5%), 
• and toys and sports goods (4.7%). 

On services

EU has agreed to commitments across 144 services sub sectors, including 

• IT/ITeS, 
• professional services, 
• education, 
• business services.

FOR EU WHAT WE GIVEN 

Overall, India is offering duty elimination and reductions on 92.1% of the tariff lines, 

which comprises 97.5% of the EU exports to India. 

immediate duty elimination 

Within this, 49.6% of the tariff lines will see an immediate duty elimination once the agreement comes into effect.

phased elimination of tariffs

Another 39.5% of the tariff lines will be subject to a phased elimination of tariffs over five, seven, and 10 years. An additional 3% of products will see phased tariff reductions.

Notably for the EU

 the following European sectors will see duty-free access to the Indian markets: 

• machinery and electrical equipment, 
• aircraft and spacecraft, 
• optical, 
• medical and surgical equipment, 
• plastics, 
• precious stones and metals, 
• chemicals, 
• motor vehicles, 
• iron and steel, 
• pharmaceuticals, 
• and various agricultural products. 

On services

 India has agreed to open up 102 sub sectors covering EU priorities such as 

• professional, 
• business, 
• telecommunications, 
• maritime, f
• inancial, 
• and environmental services.

quota based systems

It has been learnt that negotiations over a few sectors such as automobiles and wine had caused some problems,

 but that the two sides finally agreed to quota based systems that were satisfactory to both sides. 

India agreed to allow European cars with a price tag above ₹25 lakh to be imported at lower duties of as low as 10%, from the current 110%, but subject to a quota.

Carbon Border Adjustment Mechanism (CBAM)

India and the EU also reached a limited agreement on the contentious Carbon Border Adjustment Mechanism (CBAM), Mr. Goyal added. 

The agreement creates a way for carbon footprint verifiers in India to gain accreditation.

 It also specifies that, should the EU give concessions under CBAM to a third country, those concessions would automatically apply to India too.

Ms. von der Leyen

The deal would “cut upto €4 billion in annual tariffs for exporters”, Ms. von der Leyen said. “It brings together Indian skills, services and scale with Europe’s technology, capital and innovation,” she added.