- India’s post-2014 trade pivot rests on a simple logic: comparative advantage delivers shared prosperity only when openness is carefully sequenced with the building of indigenous capability.
- Instead of dismantling tariffs indiscriminately, it has combined selective market opening with sustained investment in scale, skills, logistics, and institutions.
- The agreement expands opportunity without diluting India’s ability to shape its own development path.
- Trade matters most when it reshapes an economy, not just moves goods.
Over the past 11 years, India’s trade policy has followed a clear economic strategy. It uses trade to fuel growth, cushion global shocks, and deliver shared prosperity. The announcement of the India–EU Free Trade Agreement (FTA) is a landmark moment in this journey. It signals India’s transition into a trusted rule-shaper in global trade backed by years of steady, strategic trade engagement.
India’s Bold Trade Pivot
The foundation of India’s trade pivot is straightforward. Comparative advantage only results in shared prosperity when openness is sequenced with the buildup of indigenous capability. Since 2014, India has applied this logic with intent. Instead of dismantling tariffs indiscriminately, it has combined selective market opening with sustained investment in scale, skills, logistics, and institutions. The results are visible across sectors.
In electronics, calibrated tariff policy and production-linked incentives helped turn India from a net importer of mobile phones into a major export base within a decade since 2014.
Under PM MITRA and PLI, trade access was coupled with integrated manufacturing parks and logistical improvements in labour-intensive textiles, allowing clusters like Tiruppur and Surat to transition from low-margin intermediates to finished clothing and technological textiles while maintaining employment.
In pharmaceuticals, India held firm on intellectual property safeguards even as it invested in bulk drug parks and regulatory credibility, reinforcing its position as the world’s most reliable supplier of affordable generics. Together, these choices reflect a trade strategy that reallocates labour and capital toward sectors where productivity and global demand converge without eroding domestic resilience.
Where previous approaches (pre-2014) leaned toward caution and reluctance in trade pacts, India now pursues an active, confident strategy, engaging actively, negotiating agreements with Mauritius, the UAE, the UK, Australia, the EFTA bloc, Oman, and New Zealand. Each agreement balances export opportunity with domestic safeguards. Even with all the global tension and tariff drama, Indian exports have hit record levels. Domestic industries are getting sharper, products are more diverse, and these FTAs have opened doors to new markets one after another.
It ensures that Indian producers are not exposed prematurely to competition before they are globally competitive. India has deftly used its trade strategy to lessen both political and economic tension. The outcome is increased well-being through deliberate inclusion into global value chains rather than mindless liberalisation.
This is a complete U-turn from how things used to be earlier. Back in the late 1990s and early 2000s, deals with Sri Lanka, ASEAN (2009), Japan, and South Korea all sounded good on paper but didn’t deliver. Exports hardly moved, imports shot up, and trade deficits became a headache that wouldn’t go away. In some cases, like with ASEAN, India’s share of exports actually went down after the agreement kicked in. A lot of our producers got hammered because there weren’t enough protections.
The world changed, too. Trade isn’t just business anymore. It’s mixed up with geopolitics. Big countries throw tariffs around like weapons, sometimes for no clear reason. So for India, trade policy couldn’t stay separate from national security and resilience. The government, post-2014, stopped treating FTAs as simple tariff-cutting exercises. They started using them to build buffers, lock in certainty when everything else feels shaky, and spread our bets instead of depending too much on one or two markets.
Structural Transformation By Expanding Export Footprints
Trade matters most when it reshapes an economy, not just moves goods. Over the past 11 years, India has deliberately shifted from low‑value commodities to medium‑ and high‑value exports, applying classical principles of comparative advantage and factor endowment to climb the value curve. This evolution underpins this Free Trade Agreement.
Additionally, India moved away from leaning only on the old Western partners and deliberately looked at Indo-Pacific, West Asia, Africa, etc. The UAE CEPA in 2022, Australia ECTA in the same year, and Oman CEPA in 2025 weren’t just about trade numbers. They were political statements saying India is serious about long-term, reliable friends. Plus, they fit perfectly with companies wanting to shift supply chains out of China after COVID.
A Milestone in Scale and Scope
The India–EU Free Trade Agreement is among the most consequential trade pacts India has ever concluded and is being referred to as “Mother of all deals.” It marks a milestone not just in its economic size, but in the maturity of India’s tradecraft.
It shows an ambition appropriate to India’s position in the global economy, encompassing investment, goods, services, and new fields like digital trade and sustainability. More significantly, it demonstrates the evolution of India’s trade strategy from transactional market access to a strategic economic relationship.
The evolution is visible in how openness has been sequenced. India has liberalised decisively, where domestic capacity is established, and global demand is strong, while retaining space in sectors where livelihoods, industrial depth, or strategic autonomy are at stake.
Employment-intensive agriculture, sensitive manufacturing segments, public procurement, digital governance, and public health have been approached with calibrated timelines or clear exclusions. This reflects deliberate policy intent. The agreement expands opportunity without diluting India’s ability to shape its own development path.
The agreement’s impact on services, an area where previous India-EU talks had frequently stagnated, is as noteworthy. Long-standing obstacles that Indian enterprises faced despite their competitiveness are addressed by greater certainty for IT and ITeS firms, professional services, education, finance, and business services, as well as clearer pathways for independent professionals and contractual service providers. The agreement supports India’s primary competitive advantage in talent rather than cost by emphasising mobility, certification recognition, and regulatory clarity.
The FTA also confronts one of the defining tensions of contemporary trade, i.e., climate policy. Given India’s industrial structure and energy mix, the EU’s Carbon Border Adjustment Mechanism might have been a major source of friction. Negotiators incorporated cooperation into the deal rather than letting it become a trade barrier.
Future flexibility provisions, technical cooperation on carbon measurement, focused assistance for reducing emissions, and phased compliance provide for flexibility rather than shock. The focus is on transition rather than punishment; a strategy that acknowledges climate ambition without compromising competitiveness.
India’s bilateral trade with the EU has nearly doubled in the last decade, and the structural composition of exports is more high‑value and diversified. The EU accounts for 17% of India’s exports. These gains were central to securing predictable access for India’s high‑potential sectors in the FTA. It illustrates a disciplined trade strategy, i.e., sequencing market opening with domestic capacity building, sectoral diversification, and integration into global value chains. The result is not mere tariff negotiation, but a structural upgrade of the economy.
Shift from Trade Participant to Trade Shaper
Thus, seen in its entirety, the FTA is a strategic signal rather than just a commercial deal. As global supply chains are fracturing and economic alliances are under strain, the pact affirms that rules-based cooperation can still anchor stability in a volatile world. Over 99 % of Indian exports will receive preferential treatment in the EU market, a testament to both sides’ trust and long‑term intent to move beyond episodic trade frictions. The pact signifies India’s transition from being a participant in international trade to one that shapes it. Its importance stems not just from increased market access but also from the understanding that openness only lasts when it improves domestic capacity and produces benefits that are widely shared.
In an era of uncertainty, India’s trade strategy offers a compelling model, a credible template for how emerging powers can engage the world. The India-EU FTA is the clearest sign that India has gone from being a cautious player in global trade to someone helping write the rules. It’s not blind liberalisation. It’s a calculated, home-grown strategy. It is ambitious yet calibrated, open yet grounded in national strength. By pairing global integration with internal capacity building, India is not just expanding its economy; it is positioning itself as a long-term destination for trade, investment, and strategic partnerships.
References
- Bombay Chamber of Commerce and Industry. (n.d.). India–EU Free Trade Agreement concluded: A strategic breakthrough in India’s global trade engagement.https://bombaychamber.com/industry-news/india-eu-free-trade-agreement-concluded-a-strategic-breakthrough-in-indias-global-trade-engagement/
- India’s World. (n.d.). ASEAN deal under the scanner: Why India is demanding change. https://indiasworld.in/asean-deal-under-the-scanner-why-india-is-demanding-change/
- Invest India. (n.d.). India’s trade policies: How country positioning itself for global investment? https://www.investindia.gov.in/team-india-blogs/indias-trade-policies-how-country-positioning-itself-global-investment
- The Economic Times. (n.d.). India in talks for free trade deals with 50 nations: Piyush Goyal. https://economictimes.indiatimes.com/news/economy/foreign-trade/india-in-talks-for-free-trade-deals-with-50-nations-piyush-goyal/articleshow/125631982.cms?from=mdr
- The Economic Times. (n.d.). The year of tariffs: India’s exports impacted yet stay on a steady course in 2025, momentum likely to extend into 2026. https://economictimes.indiatimes.com/news/economy/foreign-trade/the-year-of-tariffs-indias-exports-impacted-yet-stay-on-a-steady-course-in-2025-momentum-likely-to-extend-into-2026/articleshow/126213894.cms?from=mdr
- The Hindu. (n.d.). India decides against joining the RCEP trade deal. https://www.thehindu.com/news/national/india-decides-against-joining-rcep-trade-deal/article61623346.ece
- The Times of India. (n.d.). India-EU FTA: Can ‘mother of all trade deals’ offset the impact of Trump’s tariffs? Explained. https://timesofindia.indiatimes.com/business/india-business/india-eu-fta-can-mother-of-all-trade-deals-offset-impact-of-trumps-tariffs-explained/amp_articleshow/127635546.cms
Deepa Bhaskaran is a strategic research and communications professional with 15 years of experience in advancing the Government of India’s initiatives through policy analysis and public outreach. She has authored policy papers on welfare schemes and India’s economic development. Views expressed are the author’s own.
Lipun Kumar Sanbad 
Anjali Singh 
Anshika Agarwal