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COVER STORY FEBRUARY 06, 2026 | The Indian Eye 4

INDIA-EU FTA

BIG BOLD

MOVE

The India–EU Free Trade Agreement marks a decisive shift in India’s economic diplomacy—opening new
growth pathways at home while unsettling Washington and recalibrating the geopolitical chessboard

involving the US, China and Russia.

OUR BUREAU irbhar India.” This framing is politi-
cally and economically deliberate. By
New Delhi linking the FTA to jobs, skills, start-
T he conclusion of the long-ne- ups and youth opportunity, the gov-

gotiated
ernment is countering the tradition-
India–European
Union Free Trade Agreement
(FTA) is being hailed in New Delhi as al criticism that free trade primarily
benefits large corporations. The em-
a watershed in India’s global econom- phasis on manufacturing capability,
ic engagement. Described by both localization, and technology transfer
sides as the “mother of all deals,” the allows New Delhi to argue that open-
agreement comes at a moment when ness and self-reliance are no longer
the global trading system is fractured contradictions but complementary
by protectionism, strategic rivalry and strategies.
war-driven realignments. For India, The Indian economy stands to
the FTA is not merely a trade pact; gain in several tangible ways. In au-
it is a strategic statement about eco- tomobiles, the gradual reduction of
nomic confidence, geopolitical au- import duties—while politically sen-
tonomy and the country’s ambition sitive—could catalyze innovation,
to position itself as a central pillar push domestic manufacturers up the
of the global economy. Yet the deal value chain, and integrate India more
has also triggered unease in Washing- deeply into global automotive supply
ton, highlighted fault lines within the networks. In aerospace and defense,
Western alliance, and intersected un- structured collaboration with Euro-
easily with India’s still-pending trade pean firms could accelerate the in-
negotiations with the United States. digenization of critical technologies,
At its core, the India–EU FTA a long-standing strategic goal. In IT
reflects India’s evolving economic and professional services, mobility
trajectory. With growth projected frameworks and social security coor-
to remain among the highest glob- Prime Minister Narendra Modi, with President of the European Council António Luís Santos dination promise to ease long-stand-
ally, India is increasingly viewed as ing frictions faced by Indian profes-
both a manufacturing hub and a vast da Costa, and President of the European Commission Ursula von der Leyen, during the sign- sionals in Europe, especially as AI
consumer market. The EY report ing of India-EU FTA at Hyderabad House, in New Delhi on Tuesday. (ANI Photo/Rahul Singh) and digital services reshape global
describing the agreement as one of labor markets.
the most forward-looking concession The scale of the agreement is automobiles and aerospace open a Yet the FTA’s significance goes
packages India has ever negotiat- significant. Covering nearly a quarter market long seen as difficult to pen- well beyond sectoral gains. Strategi-
ed underscores how far New Delhi of global GDP and more than a fifth etrate. For both, defense and tech- cally, it reflects India’s determination
has moved from the inward-look- of the world’s population, the India– nology collaboration offer pathways to diversify economic partnerships at
ing trade posture of the past. Tariff EU FTA links two economic giants beyond transactional trade into stra- a time when overdependence on any
liberalization across automobiles, with complementary strengths. For tegic industrial partnerships. single bloc is seen as risky. The Euro-
textiles, pharmaceuticals, defense, India, zero-duty access to the EU Prime Minister Narendra Modi pean Union, for its part, is seeking to
aerospace and services signals India’s market for textiles from Day One has framed the agreement in charac- reduce its reliance on China and, in-
willingness to integrate more deeply restores competitiveness lost after teristically aspirational terms—“Free creasingly, on the United States amid
with global value chains—on its own the withdrawal of GSP benefits. For Trade for Ambitious India, for As- growing transatlantic trade tensions.
terms. Europe, phased tariff reductions in pirational Youth, and for Aatman- Continued on next page... >>

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