India–EU FTA to Cut Non-Tariff Barriers, Add CBAM Flexibility and Boost Clean Tech, AI Cooperation

India and the European Union have concluded a long-awaited Free Trade Agreement (FTA), marking a major milestone in bilateral economic relations. The announcement was made by Prime Minister Narendra Modi and European Commission President Ursula von der Leyen at the 16th India–EU Summit in India.

The agreement positions India and the EU as trusted trade partners committed to open markets, predictability and inclusive growth. Negotiations for the pact were relaunched in 2022 and concluded after sustained dialogue between the two sides.

The agreement addresses non-tariff barriers through strengthened regulatory cooperation, enhanced transparency, streamlined customs procedures and stronger sanitary and phytosanitary standards. It also contains forward-looking provisions on the European Union’s Carbon Border Adjustment Mechanism (CBAM), including commitments on technical cooperation, recognition of carbon pricing and financial assistance to help reduce emissions.

Intellectual property protections under the agreement reaffirm TRIPS provisions and recognise the importance of digital libraries, including India’s Traditional Knowledge Digital Library (TKDL). Cooperation is also envisaged in emerging areas such as artificial intelligence, clean technologies and semiconductors.

The European Union is one of India’s largest trading partners. In 2024–25, bilateral trade in goods stood at INR 11.5 lakh crore (USD 136.54 billion), with India’s exports valued at INR 6.4 lakh crore (USD 75.85 billion) and imports at INR 5.1 lakh crore (USD 60.68 billion). Trade in services reached INR 7.2 lakh crore (USD 83.10 billion) in 2024. Together, India and the EU account for 25 per cent of global GDP and nearly one-third of global trade.

Under the FTA, more than 99 per cent of Indian exports by value will receive preferential access to the EU market. Labour-intensive sectors such as textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles will benefit from tariff reductions of up to 10 per cent, covering nearly USD 33 billion of exports.

The agreement is expected to create new opportunities for MSMEs and generate employment for women, artisans, youth and professionals. Exports worth INR 6.41 lakh crore (USD 75 billion) are projected to gain from enhanced market access.

On automobiles, a calibrated, quota-based liberalisation package will allow EU manufacturers to introduce high-end models in India, while also opening future opportunities for manufacturing and exports from India. Indian-made automobiles will also gain reciprocal access to the EU market.

The FTA also provides ambitious commitments in services, covering IT and IT-enabled services, professional services, education, financial services, tourism, construction and other business services. India will gain predictable access to 144 EU subsectors, while the EU will receive access to 102 subsectors offered by India.

A mobility framework has been incorporated to facilitate short-term business travel and the temporary movement of professionals. Commitments include provisions for intra-corporate transferees, business visitors, contractual service suppliers and independent professionals. The agreement also establishes a framework for social security cooperation and promotes student mobility and post-study work opportunities.

In financial services, the pact promotes cooperation in innovation and cross-border electronic payments, while expanding India’s access to major EU markets. Provisions have also been included for practitioners of Indian traditional medicine to work in EU member states where such practices are not regulated.

Commerce and Industry Minister Piyush Goyal described the agreement as a defining achievement in India’s global trade engagement, stating that it secures unprecedented market access for Indian exports while supporting the ‘Make in India’ initiative and enabling mobility for skilled professionals.

The India–EU FTA becomes India’s 22nd trade agreement. Since 2014, India has signed trade deals with Mauritius, the UAE, Australia, the UK, EFTA and Oman, and concluded agreements with New Zealand. Together with FTAs with the UK and EFTA, the India–EU pact effectively opens the European market for Indian exporters.

The agreement incorporates review and consultation mechanisms to tackle future regulatory and technological challenges. In line with India’s ‘Viksit Bharat 2047’ vision, the FTA is set to boost trade, investment, and strategic cooperation with the 27-member EU bloc, establishing a foundation for inclusive and resilient growth.