India-EU trade accord: Three aspects that’ll shape its success and four hoops it must jump through

Subscribe to enjoy similar stories. India’s recently concluded free trade agreement (FTA) with the EU, almost two decades in the making, has injected fresh energy into the country’s geo-economics. It offers strategists on both sides greater latitude to pursue higher economic and perhaps even geopolitical ambitions.

In a best-case scenario, it could act as a bulwark against global hegemony sought to be exercised by a third party. While the FTA is more symbolic than an economic reality at this point, it has three critical aspects that will determine its performance: manufacturing, mobility and non-tariff barriers. The first is a no-brainer: the deal is visibly designed to boost the factory sector in both economies.

India’s enduring concern has been to safeguard its sprawling base of labour-intensive manufacturing, any threat to which could have a wider fallout; lower EU import duties on Indian apparel, textiles, footwear, etc, could well give this segment a leg-up. Broadly, though, making the most of easier EU-market access would need our manufacturers to sharpen their competitive edge and get past a maze of restrictive entry rules. India’s tariff relief has nicely been calibrated in highly guarded sectors for gradual exposure of local players to European competition (with a low-duty quota for high-end vehicle imports, for example).

By and large, a wider opening of our market to EU machinery, electrical equipment, aircraft and other items is a nod to Brussels’ need to keep factories humming. In case either side has second thoughts, the FTA allows a general review five years after it goes into force. An interesting part of this agreement is its mobility pact, which promises freer EU entry for Indian workers and students.