Policy Brief 8 hours ago
The conclusion of the India-EU Free Trade Agreement (FTA) in January 2026 marks one of the most consequential developments in India’s trade policy architecture in over a decade. By granting preferential, near duty-free access to Indian exports particularly in textiles, apparel, leather, footwear, and marine products the agreement directly addresses a long-standing structural disadvantage faced by Indian labor-intensive manufacturing in the European market.
The agreement should not be interpreted narrowly as a tariff-reduction exercise. Rather, it constitutes a repositioning of India within a rapidly fragmenting global trade system characterized by rising protectionism, regulatory divergence, and bloc-based economic integration. In this context, the FTA serves three simultaneous functions:
• An export competitiveness shock for labor-intensive sectors,
• A catalyst for firm-level upgrading and scale-driven productivity growth, and
• A geopolitical hedge that strengthens India’s outside options amid heightened uncertainty in U.S. trade policy.
While the agreement has been politically concluded, implementation remains subject to legal finalization and ratification processes on both sides. Nonetheless, the economic direction and implications are already clear.
