Rajiv Memani: Why we can expect the India-EU trade agreement to yield win-win outcomes

Subscribe to enjoy similar stories. Prime Minister Narendra Modi and his government deserve applause for concluding a landmark trade deal with the European Union (EU). The agreement negotiated over the last six months reflects maturity and avoids red lines for both sides while focusing on their complementarities.

The deal has rightly been characterized as the ‘mother of all deals.’ The EU is the world’s second-largest economic bloc, with a GDP of $19.5 trillion; it imports goods from outside the bloc worth $3 trillion, accounts for 12.3% of global trade and has a population of 450 million. Together, India and the EU form a market of about $24 trillion with nearly two billion people. Indian businesses gain access to a market five times India’s GDP, while European businesses can tap the fastest-growing large economy in the world.

In addition to trade, the deal will help boost investments, create an innovation ecosystem and facilitate mobility of professionals. When combined with the European Free Trade Association (EFTA) and UK trade deals, Indian businesses will now have preferential access to all of Europe. With the addition of the latest agreement, the combined GDP of India’s trade-agreement partner countries would reach $36.3 trillion—over 33% of global GDP, a significant jump from the current 15%.

Once the deal comes into effect, 99% of India’s exports to the EU will face lower or nil tariffs, aiding $33 billion worth of outward shipments from day one. Today, the EU is India’s second-largest export destination, with exports of about $79 billion and imports of $57 billion. Meanwhile, India’s share in EU imports is only 2.6%, as against China’s 22%.