India Will Have Hundreds of New Factories, The India-EU FTA as the Mother of All Deals
Ursula von der Leyen, president of European Commission, declared this week that Indian and EU negotiators had struck “the mother of all deals.” She may well be right. This is not just one of the largest ever bilateral free trade agreements. It is also one of the most comprehensive and collaborative.
While this agreement has been over a decade in the making, its timing endows it with particular significance. It is also an archetype for modern FTAs: one that understands that free trade cannot be meaningful without greater alignment of regulations and standards, and mutual respect for domestic priorities.
The Scale of the Deal
When the agreement is ratified, it will cover 2 billion people with a combined economic size of $25 trillion (comprising 25% of global GDP and one-third of global trade) and create millions of jobs in manufacturing, services, and research and innovation.
Lowered barriers will give India access to a developed market, a customer base that will become vital for growth. The EU will gain unprecedented access to the world’s fastest-growing major economy. It will boost Europe’s tech ecosystem, and companies will create an industrial footprint in India.
The leader of a European global manufacturing giant told me after the agreement was reached that they are “ready to build” in India, a sentiment that others share. This is not just about trade; it is about investment, about factories, about jobs.
Trade, which is currently valued at $136 billion, could rise to as much as $250 billion by 2032. Growth of India’s and Europe’s small- and medium-sized businesses will be unleashed when the barriers to new markets are lifted.
Integration into Global Value Chains
However, India will not simply be selling finished goods to European consumers. Thanks to tariff reduction on Indian components, Indian manufacturers will soon find themselves integrated into EU manufacturing and their trade in goods with other global partners.
Indian plastics, chemicals, engineering and electrical components, for example, will bring Indian manufacturers into advanced machinery, alternative energy and defence supply chains. This agreement has the potential to create one of the world’s greatest economic corridors between Western Europe and India. I personally believe that hundreds of new factories will be built in India.
This is the deeper significance of the deal. It is not just about market access; it is about structural integration. Indian companies will become part of European supply chains, and European companies will build factories in India. The relationship will become embedded, not just transactional.
Immediate Benefits for Labour-Intensive Sectors
For India, there are immediate benefits. Billions in gains from this agreement will flow to some of India’s most labour-intensive sectors, in small factories in rural India: textiles, gems and jewellery, apparel, footwear, and marine products. Indian customers will find greater variety on offer in time.
Altogether, these sectors could create at least 10-12 million jobs in the coming years. As much as $75 billion in new Indian goods will be unlocked. These are not abstract numbers; they represent livelihoods, opportunities, and economic transformation.
The Subtlety of the Framework
Beyond the immediate payoffs, there is a subtlety to this historic framework, and the timeframe of its effects should be measured in the longer term. The subtext is the shared desire for progress, and closer coordination in science, research, and defence.
Europe has knowledge that it has turned into experience by building things for years, but it needs lower costs and speed. India has knowledge, but not yet the years of experience. What it brings, though, are scale, technical skills, problem-solving abilities, and the experience of producing things quickly, at low cost.
This agreement puts the two together, with transformative implications, especially in scientific research and technology. India will consider joining the Horizon Europe platform, the world’s largest research programme, which will place Indian researchers on an equal footing with European ones in collaborative projects.
Meanwhile, they will cooperate on AI, semiconductors, material science, clean technologies, health and sanitation, and explore making European and Indian digital wallets interoperable. That is the story of this agreement, hidden in plain sight—collaboration of the kind we have rarely seen before.
Innovation and Shared Destiny
The innovation sparked by this agreement in both geographies will give us control over our shared destiny. India’s has been a problem of means, not ability, and given access to knowledge and resources, we have demonstrated the ability to execute well, and at scale.
After the pandemic hit, we made great strides in advanced manufacturing quickly. It is inevitable that India will develop deep capabilities and become a significant player in the creation of semiconductors, advanced batteries, and critical hardware the world needs. This partnership will give us experience, a new pool of customers and suppliers, and the capital necessary to develop an industrial base.
Security and Defence Partnership
Unsurprisingly, the agreement also establishes a cohesive security and defence partnership. Together, we will work to secure our oceans, enhance operational cooperation, build maritime security, and strengthen the freedom of navigation.
Trade and security are linked. Economic interdependence creates shared interests. Shared interests create the basis for security cooperation. The FTA is not just about commerce; it is about strategic alignment.
Mobility and Demographics
This future includes how we move. For India, it allows our care workers, engineers, and those who work and study there. And it makes sense for the EU, with its ageing demographics, to access India’s greatest resource—its legions of young and skilled professionals.
Europe needs workers; India has workers. This is not exploitation; it is complementarity. When done right, with proper protections and pathways, it benefits both sides.
Standards and Sustainability
Never have we had such a huge financial incentive to raise our consumer and manufacturing standards, and drive down our carbon emissions. Domestic costs will arise, and the journey to upskill and learn new processes may be difficult and slow. But the prize will be to become an integral partner in global value chains.
Back home, the prize will be healthier, safer workers, and tackling the pollution levels that are threatening overall progress. The FTA creates incentives for Indian industry to upgrade—not just to meet European standards, but to compete in global markets.
A Dependable Relationship
While the agreement has been rightfully praised for its ambition and the way it has broadened and deepened markets, it should be recognised for demonstrating how a dependable relationship can be established. Its remedies for conflict resolution, points of contact for trade, and the gradual removal of tariffs and duties offer clarity that is a welcome development.
In a world of uncertainty, predictability is valuable. Knowing the rules, knowing the timelines, knowing the mechanisms for resolving disputes—all of this reduces risk and encourages investment.
Conclusion: A New Model for Partnership
This FTA is the “mother of all deals” not only for its size. It represents an understanding that shared values, alongside political and economic stability, are now indispensable. It shows other nations what a mutually beneficial path forward could look like.
The EU and India find, in each other, a reliable, strategic partner—not just for trade, but for a shared and resilient prosperity.
Q&A: Unpacking the India-EU FTA
Q1: What is the scale of the India-EU FTA?
The agreement covers 2 billion people with combined economic size of $25 trillion (25% of global GDP, one-third of global trade). Current trade of $136 billion could rise to $250 billion by 2032. Labour-intensive sectors could create 10-12 million jobs, with $75 billion in new Indian goods unlocked.
Q2: How will Indian manufacturing be transformed?
Indian components will integrate into EU manufacturing supply chains—plastics, chemicals, engineering, electrical components entering advanced machinery, alternative energy, and defence. Hundreds of new factories could be built in India. The agreement creates structural integration, not just market access.
Q3: What role does research and innovation play?
India will consider joining Horizon Europe, the world’s largest research programme, placing Indian researchers on equal footing in collaborative projects. Cooperation will extend to AI, semiconductors, material science, clean technologies, health, and digital wallet interoperability—unprecedented collaboration.
Q4: How does the agreement address security and defence?
It establishes a cohesive security partnership covering ocean security, operational cooperation, maritime security, and freedom of navigation. Trade and security are linked—economic interdependence creates shared interests that form the basis for strategic alignment.
Q5: What does the agreement mean for mobility and demographics?
It facilitates movement of care workers, engineers, students. For the ageing EU, accessing India’s young, skilled professionals is a demographic complementarity, not exploitation. Proper protections and pathways benefit both sides.
