Mother of All Deals: India-E.U FTA Announcement Due Today

The conclusion of the negotiations for a Free Trade Agreement (FTA) between India and the E.U has been reached. A formal announcement will be made at the 16th E.U-India Summit on January 27 in New Delhi. Once the FTA has been signed, it will take approximately five to six months for both parties to complete their respective legal processes before the FTA is expected to be implemented.

The Prime Minister of India (PM), Narendra Modi, hosted the President of the European Council (President Costa) and the President of the European Commission (President von der Leyen). This is India's eighth trade agreement in recent years.

Summit Focuses on Trade and Security

The leaders of the cooperative group are expected to adopt a comprehensive strategic agenda, which encompasses prosperity, sustainability, current and future technology, innovation, and security. The leaders discussed multiple topics, including multilateral systems, stability in the Indo-Pacific region, the ongoing situation resulting from the Russia - Ukraine war, and the continued turmoil in the Middle East.

The E.U leaders attended India's Republic Day celebrations as guests of honour on January 26. The agreement demonstrates the renewed vigour of economic relations between the two countries. Since the discussions regarding the agreement were re-initiated, this investment agreement will be India's eighth FTA.

According to Commerce Secretary Rajesh Agrawal, the Agreement is a balanced and forward-looking agreement that will ultimately lead to deeper economic integration.

Economic Benefits and Context

The Free Trade Agreement (FTA) establishes a marketplace of two billion people or about 25% of global GDP. The FTA helps India access the E.U's affluent and stable consumer base while decreasing tariffs on Indian exports, including garments, pharmaceuticals, steel, petroleum, and machinery.

Many E.U enterprises are focusing on India with the prospects of increased market access, given the currently high duties (up to 150%) in many areas. Trade exceeded expectations over the past decade, with 6,000 E.U enterprises operating in India.

The FTA allows Europe to counter U.S actions related to protectionism and also assists in diversifying supply chains away from dependence upon China.

Negotiation History and Outlook

The first informal discussions began almost two decades ago and included a total of 15 rounds of talks. In addition, the FTA gained new momentum due to the recent launch of the E.U-India Global Trade Initiative.

According to the Global Trade Research Initiative, the current restoration of market access for E.U enterprises also provides a buffer for U.S. enterprises against the impacts of U.S. tariffs on imported goods. Furthermore, the European Commission considers the FTA as providing E.U companies with a first-mover competitive advantage in the fast-developing Indian marketplace.