India–EU FTA lowers costs without harming industry:Goods trade exceede $136 billion; Read the entire EX-IM dynamics between both countries

As global trade is increasingly shaped by tariffs, geopolitics, and supply-chain realignment, the India–EU economic relationship stands out for its clarity of purpose. The two are not rivals but partners operating on different rungs of the value chain. India exports labour-intensive, downstream and processing-based goods, while the European Union supplies capital goods, advanced technology and industrial inputs. This structural complementarity explains why an India–EU free trade agreement is likely to lower costs and expand trade rather than threaten the domestic industry. In FY2025, India–EU goods trade exceeded US$136 billion, and tariff cuts would primarily reduce input costs, deepen value-chain integration, and increase volumes—classic FTA gains that benefit producers and consumers on both sides. Indian exports to the EU, such as smartphones, garments, footwear, tyres, pharmaceuticals, auto parts, refined fuels, and cut diamonds, largely substitute EU imports from third countries rather than compete with EU manufacturing, which has long offshored these activities. EU exports—high-end machinery, aircraft, core electronic components, chemicals, quality medical devices, and metal scrap—feed India’s factories, recycling industry, and MSME clusters, raising productivity and export competitiveness. Tariff elimination, therefore, compresses input costs instead of crowding out industry. India’s Imports from the EU India’s US$60.7 billion in goods imports in FY 2025 from the EU are concentrated in capital-, technology-, and input-intensive products. High-end machinery was India’s largest import from the EU at US$13.0 billion, including turbojets (US$810 million), industrial control valves (US$418 million), and specialised industrial machines (US$343 million). India does not manufacture such advanced capital equipment at scale and depends on these imports to run its industrial and infrastructure sectors. Electronics imports totalled US$9.4 billion, led by mobile phone parts (US$3.7 billion) and integrated circuits (US$890.5 million). India needs these components to assemble smartphones and electronic devices, as domestic IC and component manufacturing remains limited. India imported aircraft worth US$6.3 billion and medical devices and scientific instruments worth US$3.8 billion, along with medicines worth US$1.4 billion, largely specialised formulations. These are high-technology products that India largely does not produce and must source from advanced manufacturing economies. Imports of industrial inputs included gems and jewellery worth US$3.0 billion, dominated by rough diamonds (US$1.7 billion); organic chemicals (US$2.3 billion); plastics (US$2.3 billion); and iron and steel worth US$2.4 billion, including ferrous waste (US$561 million) and flat-rolled products (US$249 million). Automotive imports amounted to US$2.1 billion, mainly auto parts (US$1.5 billion) and cars (US$430.6 million). These imports serve as raw material and precision inputs for India’s manufacturing, engineering and export-oriented industries rather than competing with domestic output. A notable feature was waste and scrap imports of US$2.1 billion, including aluminium scrap (US$632 million) and brass scrap (US$534 million)—key feedstock for India’s recycling industry and MSMEs. India relies on imported scrap because domestic availability is insufficient to meet the needs of its recycling and small-scale manufacturing sectors. India’s Exports to the EU India’s US$75.9 billion in goods exports to the EU are concentrated in downstream and labour-intensive sectors. Refined petroleum products topped exports at US$15.0 billion, led by diesel (US$9.3 billion) and aviation turbine fuel (US$5.4 billion). Electronics exports reached US$11.3 billion, including smartphones worth US$4.3 billion, reflecting India’s role as a scale manufacturing and assembly hub. In textiles and apparel, exports included garments worth US$4.5 billion, with girls’ suits alone at US$822 million, alongside textiles (US$1.6 billion) and made-ups (US$1.2 billion)—sectors Europe largely exited decades ago. Other major exports were machinery and computers (US$5.0 billion), including turbojets (US$756 million); organic chemicals (US$5.1 billion); iron and steel (US$4.9 billion); and pharmaceuticals (US$3.0 billion). Gems and jewellery exports stood at US$2.5 billion, dominated by cut and polished diamonds (US$1.6 billion). Automotive exports totalled US$2.2 billion, led by auto parts (US$1.6 billion), tractors (US$181.8 million), motorcycles and scooters (US$164.7 million), dumpers (US$72.2 million) and cars (US$32 million). Other labour-intensive exports included tyres (US$890 million), footwear (US$809 million) and coffee (US$775 million). Alcohol trade remains marginal. India exported wines worth US$1.4 million and spirits worth US$24.5 million to the EU. Imports from the EU were higher, with wines worth US$7.9 million and spirits worth US$87.8 million, reflecting Europe’s dominance in premium alcohol. Classic FTA Economics at Work India–EU merchandise trade is therefore best understood not as a contest for market share, but as a production partnership. European machinery, components and precision inputs raise productivity in Indian factories, while Indian scale manufacturing delivers affordable, consumer-ready products to Europe. Because both economies specialise in different segments, tariff elimination works as a cost-reduction tool rather than a displacement shock. An India–EU FTA would thus deliver classic trade gains—higher volumes, deeper integration and stronger industrial competitiveness on both sides—at a moment when such economically rational trade arrangements are becoming increasingly rare.