‘India-EU FTA could unlock access to $875 bn market, bring tariff parity with ASEAN peers’

New Delhi: India’s proposed free trade agreement (FTA) with the European Union could unlock access to a $875 billion market and bring tariff parity with ASEAN peers as the country navigates a critical juncture in the evolving global trade landscape, Boston Consulting Group (BCG), India-head Rahul Jain said.

Last month, India and the UK inked a landmark FTA that will cut tariffs on British whisky, cars and an array of items, besides boosting bilateral trade by around $34 billion annually. The FTA is expected to benefit 99 per cent Indian exports from tariff.

“The global trade environment is undergoing a structural transformation where geopolitics and economic nationalism are becoming as important as cost-efficiency and comparative advantage. Trade today is increasingly influenced by preferential access for partner nations, punitive tariffs and sanctions for adversaries and incentives that are rewiring supply chains to boost domestic production in strategic sectors,” he said.

The traditional ‘just-in-time’ supply chain model is giving way to a ‘just-in-case’ approach, driven by vulnerabilities exposed during the pandemic and ongoing geopolitical tensions.

India is uniquely positioned to benefit from this realignment, leveraging its strategic location, large domestic consumption base, favourable demographics and workforce and policy push towards manufacturing and technology-driven growth, he said, adding, this advantage becomes even more significant with the recent announcement from the US to levy 50 per cent tariffs on most Indian exports.

The preferential access to the UK and potentially the EU could provide new growth markets, particularly for labour-intensive sectors, offering a valuable buffer against rising US protectionism, he said.

“The growing adoption of the China+1 strategy gives India a prime opportunity to compete effectively with China and Association of Southeast Asian Nations (ASEAN) in emerging sectors such as semiconductors, electronics, and rare earth minerals,” he said.

To capture this opportunity, India must secure access to critical raw materials, strengthen domestic capabilities through global partnerships and localized R&D, accelerate FTAs with key markets and build state-level infrastructure readiness to attract foreign investment.