Once implemented, EU FTA credit positive for India, says Moody's
This story was originally published at 20:13 IST on 27 January 2026
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NEW DELHI – The free trade agreement between India and the European Union, announced Tuesday, will be 'credit positive' for India once it comes into effect, according to Moody's Ratings. The agreement supports "India's ambition to develop its manufacturing sector, attract foreign investment, and strengthen export competitiveness of its labour-intensive goods," the rating agency said Tuesday.
Moody's currently rates India at 'Baa3' with a 'Stable' outlook. The EU accounts for more than 15% of India's total exports.
India and the EU concluded the free-trade agreement Monday, offering to cut tariff on over 95% of export value for both sides. With these provisions, the India-EU agreement--termed "mother of all deals" by European Commission President Ursula von der Leyen--aims to double bilateral trade by 2032. The bilateral goods trade between India and the EU was $64 billion in 2024-25 (Apr-Mar).
According to the rating agency, "India's conclusion of its trade negotiations with the EU reflects its continued efforts to selectively diversify trade relationships."
A key highlight of the trade deal is New Delhi's commitment to cut duty on cars to 10% from 110% in a phased manner with a quota of 250,000 cars per year. The duty cut would be only on high-end cars of over 15,000-20,000 euros (nearly $18,000 to $24,000), Commerce and Industry Minister Piyush Goyal said. While this is an opportunity for EU carmakers, it will add competition to Indian manufacturers, Moody's said.
The free trade agreement offers other host of benefits to both nations. Under the trade deal, India will cut tariffs to 0% on plastics, aircraft, chemicals, iron and steel, pharmaceuticals, sheep meat, biscuits, pet food, pastries, bread, pasta, chocolate, fruit juices, non-alcoholic beer, 20% of pearls, precious stones and metals, and 90% of medical and surgical equipment. India, on other hand, will get duty-free market access to products from sectors like textiles, footwear, base metals, marine products, and chemicals.
India and the EU aim to enforce the agreement by the end of 2026, and the two sides intend to fastrack the legal scrubbing of the document of the trade deal. "Ultimately, the broader benefits of the FTA will hinge on progress in complementary areas such as improving business friendliness and streamlining regulations," Moody's said. End
US$1 = INR 91.72
Reported by Priyasmita Dutta
Edited by Akul Nishant Akhoury
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