The recently finalized India-European Union Free Trade Agreement (FTA) is expected to provide a significant boost to various states across India, ranging from Maharashtra and Karnataka in the west and south to Uttar Pradesh and Tamil Nadu in the north and south. This comprehensive pact, termed the "mother of all deals" by Prime Minister Narendra Modi, aims to deepen economic integration and enhance India's global trade footprint. The FTA is projected to increase Indian exports by ₹6.4 lakh crore and unlock EU markets for businesses across the country.

The agreement focuses on eliminating 9,425 tariff lines, with significant implications for sectors like textiles, leather, agriculture, and manufacturing. Uttar Pradesh Chief Minister Yogi Adityanath hailed the FTA as a "historic leap" in India's global economic journey, noting that it integrates India with 27 European nations and provides preferential market access for over 99% of Indian goods.

Impact Across States

• Maharashtra and Gujarat: These states are expected to see increased demand for textiles and chemicals. Maharashtra's Pune-Mumbai corridor, a key IT hub, is also poised to benefit from the FTA's boost to the IT and ITeS sector.
• Tamil Nadu: The state's textile and leather clusters in areas like Tirupur and Vellore-Ambur are likely to gain significantly from the elimination of import duties on these products in the EU.
• Karnataka and Telangana: The pharmaceutical and electronics sectors in these states are positioned for growth due to improved market access and reduced tariffs.
• Uttar Pradesh: The leather industry in Agra-Kanpur is expected to benefit from increased sourcing by the EU's leather and footwear industry.
• West Bengal: The state's tea and seafood exports are expected to see significant gains.

Key Benefits and Provisions

The India-EU FTA offers several key advantages:

• Tariff Reductions: The agreement calls for the elimination or sharp reduction of import duties on the vast majority of traded goods. EU tariffs on Indian exports will fall dramatically, with around 96.8% of tariff lines being duty-free or near zero. India will also liberalize about 97% of EU exports.
• Textile Industry Boost: Current tariffs on textiles and apparel exports to the EU, ranging from 12-16 percent, are set to fall to zero, leveling the playing field for Indian manufacturers. This is particularly important as Indian textile exports to the EU currently hold a smaller market share compared to competitors like China.
• Leather and Footwear Industry Growth: The elimination of import duties will allow the EU's $100 billion leather and footwear industry to increase sourcing from India, creating jobs and new enterprises in key clusters.
• Pharmaceutical and Medical Device Advantages: The FTA grants European companies easier access to India's growing market for high-end medical devices and technologies. It eliminates tariffs on nearly all EU pharmaceutical products and over 90% of optical, medical, and surgical equipment, aiming to reduce healthcare costs and boost trade.
• Services Sector Expansion: The agreement significantly expands services trade, securing predictable and non-discriminatory access for Indian firms across 144 EU service subsectors, including IT, professional services, education, finance, and tourism.
• Automobile Tariff Reductions: Tariffs on automobiles are set to be reduced from as high as 110% to 10% over five years, benefiting European manufacturers in India.
• Gems and Jewellery Sector Growth: Zero-duty access to the EU market is expected to empower export hubs in Gujarat, Rajasthan, Maharashtra, and West Bengal to ramp up shipments of precious jewellery.

Strategic Significance

The India-EU FTA is strategically significant as India seeks to diversify its export markets and reduce reliance on China. It comes amidst a global trade realignment and aims to capitalize on the established relationship between India and the EU, which is India's largest trading partner. Bilateral trade in goods and services between India and the EU stood at over $219 billion in 2024-25.

Overall, the India-EU FTA is expected to create new opportunities for economic growth and development across various states in India, fostering deeper integration into global value chains and promoting trade and investment between the two regions.