How the India–EU FTA Can Boost MSMEs and Create New Jobs

India and the European Union have announced the conclusion of the India–EU FTA (Free Trade Agreement) at the 16th India–EU Summit in New Delhi. The announcement was made by Prime Minister Narendra Modi and European Commission President Ursula von der Leyen during the visit of EU leaders to India.

The deal marks an important step in India–EU ties. Both sides have agreed to work as reliable partners with open markets, clear trade rules, and broad-based growth.

Talks on the agreement restarted in 2022, backed by strong political support on both sides. India and the EU are the 4th and 2nd largest economies in the world. Together, they account for about 25% of global GDP and close to one-third of global trade. The FTA is expected to open large business chances across many sectors.

Trade Scale and Strategic Value

The EU is one of India’s key trade partners. In 2024–25, trade in goods between India and the EU reached INR 11.5 lakh crore (USD 136.54 billion).

India exported goods worth INR 6.4 lakh crore (USD 75.85 billion), while imports stood at INR 5.1 lakh crore (USD 60.68 billion). Trade in services also grew and reached INR 7.2 lakh crore (USD 83.10 billion) in 2024.

Officials say the agreement goes beyond tariff cuts. It aims to build a broad economic partnership that supports supply chains and boosts two-way investment.

Wider Market Access for Indian Exporters

Commerce and Industry Minister Piyush Goyal called the agreement a major step in India’s global trade efforts. He said the FTA gives market access to more than 99% of Indian exports by value to the EU. This is expected to support the Make in India program and improve India’s standing in global trade.

The agreement covers goods, services, rules of origin, trade remedies, customs, and trade facilitation. It also includes areas such as small businesses and digital trade.

Jobs, MSMEs, and Labor-Heavy Sectors

The FTA is expected to support job creation and MSME growth, especially in sectors that employ large numbers of workers. These include textiles, clothing, leather, footwear, marine products, gems and jewelry, handicrafts, engineering goods, and automobiles.

Tariffs of up to 10% on nearly USD 33 billion worth of exports are expected to fall to zero once the agreement takes effect. This could benefit women workers, artisans, young people, and skilled professionals, while helping Indian firms connect better with European and global supply chains.

Services, Mobility, and Skilled Talent

Services play a major role in both economies. The agreement is expected to open doors in IT and IT-enabled services, professional services, education, finance, tourism, construction, and other business areas. India will get access to 144 EU service subsectors, while the EU will gain access to 102 subsectors in India.

The deal also includes steps to support short-term business travel, company transfers, and professional services, helping India strengthen its role as a source of skilled talent.

A Forward-Looking Partnership

The India–EU FTA also supports cooperation in areas such as artificial intelligence, clean technology, and semiconductors. It includes review systems to address future trade issues. With this deal, the EU becomes India’s 22nd FTA partner, in line with India’s goal of building strong and varied trade ties.

Beyond trade figures, the agreement is seen as a step toward steady, broad-based growth, in line with India’s vision of Viksit Bharat 2047.

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