7: India-EU Trade Agreement: A Strategic Turning Point

• Historic Accord: On January 27, 2026, India and the European Union (EU) concluded their Free Trade Agreement (FTA) negotiations, ending a nearly 20-year deadlock. The deal encompasses a market of 2 billion people and 25% of global GDP. • Deep Tariff Liberalisation: The agreement provides immediate zero-duty access for over 99% of India’s exports by value. In return, India will gradually reduce tariffs on EU cars (from 110% to 10%) and wines/spirits over a 5–10 year period. • Beyond Traditional Trade: Uniquely, the deal includes a Security and Defence Partnership framework, moving beyond commodities to co-development of military hardware, maritime security, and counter-terrorism cooperation.• Technology & Green Transition: A dedicated \'Trade and Sustainable Development\' chapter aligns both regions on climate goals. It facilitates the transfer of EU high-tech for semiconductors, AI, and green hydrogen to support India’s energy transition. • Mobility for Professionals: India secured a facilitative framework for the mobility of professionals, including AYUSH practitioners and IT experts, while the EU extended working rights to family members of intracorporate transferees. • Geopolitical Hedging: The \'Mother of All Deals\' serves as a strategic hedge for both parties against global economic fragmentation and over-dependence on singlemarket supply chains (de-risking from China and the US). Key Definitions & Provisions • Free Trade Agreement (FTA): A pact between two or more nations to reduce barriers to imports and exports among them. Under an FTA, goods and services can be bought and sold across borders with little or no government tariffs or quotas. • Rules of Origin (RoO): Criteria used to determine the national source of a product. These ensure that only goods truly produced in India or the EU benefit from the lower tariffs, preventing \'trade deflection\' from third parties. • Geographical Indications (GIs): A sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin (e.g., Darjeeling Tea, Champagne). A separate agreement on GIs is being finalized alongside the FTA. Conclusion The India-EU FTA signifies a shift from purely commercial transactions to a comprehensive strategic alignment. It anchors India’s \'Atmanirbhar\' ambitions within the European value chain while offering the EU a reliable alternative in a multipolar world. UPSC Relevance • GS Paper 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests. • GS Paper 3: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.