In its assessment, Moody’s said the FTA reflects India’s “continued efforts to selectively diversify trade relationships,” and that once the pact takes effect, it will support India’s strategy to expand domestic manufacturing, attract more foreign investment and enhance the global competitiveness of labour‑intensive exports.
India has concluded the biggest free trade agreement (FTA) in its history with the European Union, Prime Minister Narendra Modi said after holding summit talks with the 27-nation bloc’s top leaders Ursula von der Leyen and Antonio Costa.
“This is not just a trade agreement. This is a new blueprint for shared prosperity,” Modi said in his media statement. The two sides also inked a strategic defence partnership pact and a mobility agreement.
The agreement significantly reduces duties on a wide range of EU goods. Moody’s noted that while imports from Europe account for a relatively modest share of India’s overall import bill, lower tariffs could help ease input costs for manufacturers.
European automakers, in particular, stand to benefit from easier access to the world’s third‑largest car market, enabling more premium models to enter India under a calibrated tariff‑cut framework. The move could intensify competition for Indian automakers but broaden consumer choice.
However, Moody’s cautioned that the ultimate gains from the FTA will depend on India’s progress on complementary domestic reforms, including improvement in business friendliness and greater regulatory streamlining.
These factors, it said, will be crucial to translating tariff concessions into sustained investments and trade flows.
The agreement comes at a time when global supply chains are being reshaped by geopolitical tensions and protectionist policies, with India seeking to anchor itself more deeply into diversified, stable trading networks.
The EU and India had first launched negotiations for the FTA in 2007, before the talks were suspended in 2013 due to a gap in ambition. The negotiations were relaunched in June 2022. The EU, as a bloc, is India’s largest trading partner in goods.
For the financial year 2024-25, India’s total trade in goods with the EU was worth about $136 billion, with exports around $76 billion and imports at $60 billion.
