India–European Union Free Trade Agreement (FTA): “Mother of All Deals”

Complete UPSC Prelims-Oriented Analysis (2026 Focus)

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Why in News?

After nearly 20 years of negotiations (since 2007), India and the European Union finalised a Free Trade Agreement (FTA) in 2026. Leaders on both sides have described it as the “mother of all deals”, highlighting not just economic but also geopolitical significance.

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At a Glance (Prelims Must-Remember)

Aspect	Details
Parties	India & European Union (27 nations)
Negotiations began	2007
Talks resumed	2022
Finalised	2026
Nature	India’s largest-ever FTA
Global trade share	~ 1/3rd of global trade
Entry into force	Expected within calendar year 2026

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Strategic & Geopolitical Significance

• Comes amid global trade uncertainty due to:

  • U.S. tariff regime

  • Fragmentation of global supply chains

• Seen as a move to:

  • Reduce strategic dependencies

  • Strengthen rules-based trade order

• Leaders’ statements reflect geoeconomic alignment:

  • PM Modi: “Strengthen stability amid global turmoil”

  • Ursula von der Leyen: “Cooperation is the best answer to global challenges”

📌 Prelims Angle: Increasing importance of trade blocs and economic diplomacy.

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Market Access: Who Gained What?

EU Concessions to India

• 99.5% of Indian exports to EU get tariff reduction

• 97% of tariff lines covered

• 90.7% of exports → Zero duty from Day 1

• Another 2.9% → duty elimination in 3–5 years

• Remaining 6% → tariff reductions (not full elimination)

Key Indian Export Sectors Benefiting (Zero Duty)

Sector	Current EU Tariffs
Marine products	Up to 26%
Chemicals	12.8%
Plastics & rubber	6.5%
Leather footwear	17%
Textiles & apparel	12%
Base metals	10%
Gems & jewellery	4%
Furniture	10.5%
Toys & sports goods	4.7%

💡 Labour-intensive sectors worth ₹2.87 lakh crore (~$33 bn) benefit directly → employment boost

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India’s Concessions to EU

• 97.5% of EU exports to India covered

• 92.1% of tariff lines see duty cuts/elimination

Type of Reduction	Share
Immediate duty elimination	49.6%
Phased elimination (5–10 yrs)	39.5%
Phased reduction	3%

EU Sectors Gaining Duty-Free or Lower Access

• Machinery & electrical equipment

• Aircraft & spacecraft

• Optical, medical & surgical equipment

• Pharmaceuticals

• Chemicals

• Motor vehicles

• Iron & steel

• Precious stones & metals

• Select agricultural products

📌 Prelims Trap: India has not fully opened agriculture or dairy.

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Sensitive Sectors Excluded (Very Important for MCQs)

Protected by India

• Agriculture

• Dairy sector

Protected by EU (Tariffs Retained On)

• Beef

• Sugar

• Rice

• Chicken meat

• Milk powder

• Honey

• Bananas

• Soft wheat

• Garlic

• Ethanol

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Automobiles & Wine: Key Compromise

• European luxury cars (> ₹25 lakh):

  • Import duty reduced from 110% to as low as 10%

  • Subject to quota-based system

• Similar quota approach used for wine imports

📌 Prelims Tip: Reduction is not blanket, but quota-based.

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Services Trade Commitments

EU Commitments

• 144 services sub-sectors

• Includes:

  • IT / ITeS

  • Professional services

  • Education

  • Business services

India Commitments

• 102 services sub-sectors

• Covers EU priorities:

  • Professional services

  • Telecommunications

  • Maritime

  • Financial services

  • Environmental services

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Carbon Border Adjustment Mechanism (CBAM)

What Was Agreed?

• India & EU reached a limited agreement

• Key features:

  • Indian carbon footprint verifiers can get EU accreditation

  • Automatic extension to India if EU grants CBAM concessions to any third country

📌 Prelims Hot Topic: CBAM + climate-linked trade barriers.

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Ratification Process (Procedural Questions Possible)

1. Text clean-up (10–15 days)

2. Legal scrubbing

3. Translation into EU languages

4. Approval by:

   • 27 EU Member States

   • European Parliament

5. Entry into force → Expected in 2026

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Why This FTA Matters for India (Exam Summary)

• Boosts exports & manufacturing

• Strengthens Make in India

• Improves access to high-tech EU goods

• Helps India integrate into global value chains

• Enhances geopolitical positioning vis-à-vis China & U.S.

• Protects sensitive sectors while opening competitive ones

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Prelims Practice MCQ (Try This)

Q. With reference to the India–EU Free Trade Agreement, consider the following statements:

1. The EU will eliminate tariffs on more than 99% of Indian exports by value.

2. India has fully opened its dairy sector under the agreement.

3. Carbon Border Adjustment Mechanism (CBAM) concessions to any third country will automatically apply to India.

Which of the statements given above is/are correct?

Answer: 1 and 3 only