Mains Practice Questions

Introduction:

The India–EU Free Trade Agreement (FTA) marks a decisive shift from years of stagnation to strategic realignment, positioning trade as a tool of geopolitical stability in an era of fractured supply chains and bloc politics, the FTA is not merely commercial but a geo-economic instrument aimed at resilience, diversification, and strategic autonomy for both partners.

Body:

Role of the India–EU FTA in Strengthening India’s Strategic Autonomy

• Market Diversification And Reduced Dependency: In a world of sanctions and trade weaponisation, the FTA secures India preferential access to the world’s largest single market, reducing over-dependence on any one geography.
  • With bilateral trade at $136 billion and the FTA expected to unlock $75 billion in additional exports, India gains economic insulation against external shocks and coercive trade practices.
• Supply-Chain Resilience And De-Risking: The FTA aligns with India’s strategy of de-risking without decoupling, particularly from China-centric value chains.
  • Product-specific rules of origin and calibrated tariff liberalisation allow Indian firms to integrate into EU-centric global value chains while retaining flexibility in sourcing inputs—strengthening autonomy through diversification rather than isolation.
• Strategic Leverage In Rule-Making: By embedding trade within sustainability, technology, and standards cooperation, the FTA enables India to engage rule-making from within, rather than being a passive rule-taker.
  • The MFN assurance on flexibilities under the Carbon Border Adjustment Mechanism (CBAM) gives India negotiating space to protect developmental interests while engaging on climate-trade interfaces.
• Technology, Mobility, And High-Quality Investment: The agreement goes beyond tariffs to include services, professional mobility, and technology cooperation.
  • Commitments in IT, professional services, and education, along with predictable mobility frameworks (ICTs, CSS, IPs), enhance India’s human-capital leverage and reduce dependence on a single technology ecosystem.
• Reinforcing Multi-Alignment In A Multipolar Order: The FTA complements India’s broader strategy of multi-alignment, strengthening ties with the EU while maintaining autonomy vis-à-vis the US–China rivalry.
  • Both India and the EU prefer sovereignty, flexibility, and issue-based coalitions, positioning themselves as stabilising middle powers in a multipolar world.

Challenges That Could Constrain Strategic Autonomy

• Green Protectionism Through CBAM: Despite assurances, CBAM risks acting as a de facto trade barrier by adding 20–35% cost layers to Indian exports, potentially neutralising tariff gains and constraining policy space based on the principle of Common But Differentiated Responsibilities.
• Digital Sovereignty And Data Governance Gaps: Divergence between the EU’s GDPR and India’s DPDP Act, 2023 especially broad state exemptions and lack of an independent regulator has delayed data adequacy, raising compliance costs for Indian IT firms and limiting gains in high-value digital trade.
• Geopolitical And Multilateral Frictions: Differences over Russia–Ukraine, WTO subsidy rules (MSP and public stockholding), and the EU’s push for diluted MFN and S&DT norms reflect persistent tensions that could spill over into trade cooperation.

Measures To Maximise Strategic-Autonomy Gains

• Green Equivalence Framework: Harmonise India’s Carbon Credit Trading Scheme with EU ETS to ensure carbon payments remain within India while meeting EU standards.
• Zonal Data Adequacy Sandboxes: Create GDPR-aligned data enclaves (e.g., GIFT City) to enable high-value data services without compromising national security.
• Third-Market Co-Creation: Combine EU capital (Global Gateway) with India’s execution capacity in Africa and the Indo-Pacific to shift focus from bilateral frictions to shared global outcomes.
• Critical Raw Materials Partnership: Move from buyer-seller to joint-processor models with assured technology transfer and value addition in India.

Conclusion

The India–EU FTA represents a shift in India’s trade strategy from dependence to deliberate diversification, using economic engagement to enhance resilience rather than vulnerability. By anchoring India within a trusted yet non-exclusive partnership, the agreement strengthens India’s capacity to navigate fragmented supply chains, influence evolving trade norms, and pursue growth without compromising strategic independence in a contested global economy.