The India-EU Free Trade Agreement (FTA) has been finalized, marking the end of an 18-year journey of negotiations. Prime Minister Narendra Modi, along with European Commission President Ursula von der Leyen and Council President Antonio Costa, hailed the agreement as a landmark partnership.

Key Highlights and Expectations

• "Mother of All Deals": Prime Minister Modi has called the agreement the "mother of all deals," emphasizing its potential for sweeping economic gains and its representation of a landmark partnership between two of the world's largest economies. Ursula von der Leyen echoed this sentiment, describing it as the "mother of all deals" and highlighting the creation of a free trade zone encompassing two billion people.
• Boost to Trade and Manufacturing: The agreement is expected to provide a significant boost to Indian manufacturing, particularly in sectors like textiles, gems, and leather. It aims to deepen investment and trade ties between India and Europe. The EU anticipates doubling its trade exports to India by 2032, driven by the elimination or reduction of tariffs on over 90% of EU goods.
• Tariff Reductions: The deal will cut or eliminate tariffs on almost 97% of European exports, potentially saving up to 4 billion euros annually. Tariffs on cars will be gradually reduced from a high of 110% to as low as 10%, while wine duties will decrease from 150% to as low as 20%. Tariffs on processed foods like pasta and chocolate, currently at 50%, will be completely eliminated.
• Strategic Implications: Beyond trade, the agreement includes a Security and Defence Strategic Partnership, committing India and the EU to protecting the "rules-based international order". This partnership addresses shared challenges like maritime security and counter-terrorism and allows Indian firms to participate in European defense programs.
• Global Economic Significance: The FTA is expected to account for approximately 25% of global GDP and nearly one-third of global trade. It aims to create significant opportunities for businesses and consumers in both India and the EU.

Why It Matters Amid Global Turmoil

• Countering Economic Uncertainty: The agreement serves as a shield against global economic and geopolitical uncertainty. By complementing existing deals with the UK and EFTA, it reinforces India's role as a central pillar of the global economy.
• Reducing Dependence on the U.S.: The deal is viewed as a way for both India and the EU to reduce their dependence on the U.S., particularly given the unpredictable nature of the U.S. relationship.
• Addressing China's Dominance: The agreement is also motivated by concerns over China's growing trade surplus and its tightening grip on the manufacturing supply chain. Both India and the EU aim to restrict Chinese products in strategic sectors and reduce their reliance on Chinese imports.

Challenges and Considerations

• Impact on Small Producers: Concerns remain about the potential impact on small producers, particularly in the agricultural and dairy sectors. Small-scale farmers may struggle to compete with large-scale European agricultural imports.
• Meeting EU Standards: Indian exporters will need to meet high EU standards, which could pose a challenge for some producers.
• Balancing Interests: India is expected to offer concessions in sectors such as automobiles, wines, and spirits, requiring a careful balancing of interests to ensure domestic industries remain competitive.

Overall, the India-EU Free Trade Agreement represents a significant step towards strengthening economic and strategic ties between the two regions. While challenges remain, the agreement's potential benefits in terms of trade, investment, and geopolitical stability are substantial, particularly in the context of ongoing global turmoil.