Exports account for about 22% of India's GDP. Anything that enhances it, presents significant potential to boost domestic incomes and create employment. So far, India has been concluding trade agreements with individual countries - the UAE, Britain and New Zealand. With the India-EU FTA, it now steps onto a larger stage.
The EU offers unparalleled access to one of the world's most sophisticated markets. It is already India's largest trading partner in goods. In 2024-25, bilateral trade in goods reached $136.5 bn, while services trade crossed $83 bn. The latest FTA deepens this relationship by granting preferential market access to over 99% of Indian exports by value, across a combined economic space accounting for roughly a quarter of global GDP.
Official estimates suggest exports worth nearly $75 bn are now poised for accelerated growth, with labour-intensive sectors set to gain significantly from immediate tariff elimination on nearly $33 bn of exports. These are not abstract gains. Export- led growth in these sectors supports large-scale employment, particularly for women, artisans and semi-skilled workers, and strengthens regional manufacturing clusters across India.
For SMEs, scale and predictability of EU market access can be transformative. MSMEs often struggle not with lack of competitiveness but with limited access to large, stable markets. Preferential access, combined with stronger regulatory cooperation and streamlined customs procedures under the FTA, can help these firms scale exports, invest with confidence and integrate more deeply into GVCs.
The agreement also reflects calibrated trade-offs. India has agreed to a phased, quota-based liberalisation of automobile imports, while securing reciprocal access for India-made vehicles in the EU. If managed well, this can strengthen 'Make in India', enhance consumer choice and encourage tech transfer provided domestic manufacturing competitiveness continues to improve.
Perhaps the most consequential dimension of the India-EU FTA lies beyond traditional trade metrics. The EU's Carbon Border Adjustment Mechanism (CBAM) embeds climate considerations directly into trade by placing a carbon cost on emission- intensive imports such as steel, aluminium and cement. Inclusion of forward-looking CBAM provisions in the FTA covering dialogue, technical cooperation, recognition of carbon pricing mechanisms and targeted support marks an important shift from unilateral regulation to structured engagement.
For India Inc, this creates both challenge and opportunity. Carbon-linked trade measures can raise near-term compliance costs. But they also reward early movers in clean energy adoption and low-carbon manufacturing. India has some of the world's lowest clean energy costs and highest availability. These position us well to compete in the emerging trade environment. We have more to gain than to lose.
More importantly, the India-EU partnership brings together complementary strengths. Europe offers advanced tech, innovation and climate finance. India offers scale, manufacturing capability and a fast-growing clean-energy market. Larger markets incentivised investment and partnerships.
A step change in EU-India business partnerships in areas such as solar manufacturing, batteries, electric mobility, clean technologies and semiconductors is expected. This will help build resilient alternatives to concentrated GVCs while supporting India's energy transition and job creation in future-facing industries.
The FTA is a central pillar of India's broader strategy to diversify trade partnerships. But announcements are only the starting point. Its success will ultimately be judged by outcomes: more jobs, stronger small businesses, higher farm incomes, cleaner industries and greater resilience in a volatile global economy.
This agreement binds India more closely with a major economic partner that values stability, rules and long-term cooperation. If implemented with focus and follow-through, it can help India secure growth that's not just faster but also more diversified, more sustainable and more inclusive.
The EU offers unparalleled access to one of the world's most sophisticated markets. It is already India's largest trading partner in goods. In 2024-25, bilateral trade in goods reached $136.5 bn, while services trade crossed $83 bn. The latest FTA deepens this relationship by granting preferential market access to over 99% of Indian exports by value, across a combined economic space accounting for roughly a quarter of global GDP.
Official estimates suggest exports worth nearly $75 bn are now poised for accelerated growth, with labour-intensive sectors set to gain significantly from immediate tariff elimination on nearly $33 bn of exports. These are not abstract gains. Export- led growth in these sectors supports large-scale employment, particularly for women, artisans and semi-skilled workers, and strengthens regional manufacturing clusters across India.
For SMEs, scale and predictability of EU market access can be transformative. MSMEs often struggle not with lack of competitiveness but with limited access to large, stable markets. Preferential access, combined with stronger regulatory cooperation and streamlined customs procedures under the FTA, can help these firms scale exports, invest with confidence and integrate more deeply into GVCs.
The agreement also reflects calibrated trade-offs. India has agreed to a phased, quota-based liberalisation of automobile imports, while securing reciprocal access for India-made vehicles in the EU. If managed well, this can strengthen 'Make in India', enhance consumer choice and encourage tech transfer provided domestic manufacturing competitiveness continues to improve.
Perhaps the most consequential dimension of the India-EU FTA lies beyond traditional trade metrics. The EU's Carbon Border Adjustment Mechanism (CBAM) embeds climate considerations directly into trade by placing a carbon cost on emission- intensive imports such as steel, aluminium and cement. Inclusion of forward-looking CBAM provisions in the FTA covering dialogue, technical cooperation, recognition of carbon pricing mechanisms and targeted support marks an important shift from unilateral regulation to structured engagement.
For India Inc, this creates both challenge and opportunity. Carbon-linked trade measures can raise near-term compliance costs. But they also reward early movers in clean energy adoption and low-carbon manufacturing. India has some of the world's lowest clean energy costs and highest availability. These position us well to compete in the emerging trade environment. We have more to gain than to lose.
More importantly, the India-EU partnership brings together complementary strengths. Europe offers advanced tech, innovation and climate finance. India offers scale, manufacturing capability and a fast-growing clean-energy market. Larger markets incentivised investment and partnerships.
A step change in EU-India business partnerships in areas such as solar manufacturing, batteries, electric mobility, clean technologies and semiconductors is expected. This will help build resilient alternatives to concentrated GVCs while supporting India's energy transition and job creation in future-facing industries.
The FTA is a central pillar of India's broader strategy to diversify trade partnerships. But announcements are only the starting point. Its success will ultimately be judged by outcomes: more jobs, stronger small businesses, higher farm incomes, cleaner industries and greater resilience in a volatile global economy.
This agreement binds India more closely with a major economic partner that values stability, rules and long-term cooperation. If implemented with focus and follow-through, it can help India secure growth that's not just faster but also more diversified, more sustainable and more inclusive.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Sumant Sinha
Chairman-CEO, ReNew