India’s newly signed free trade agreement with the European Union (EU) is expected to greatly accelerate growth in electronics, engineering and semiconductor manufacturing by lowering tariffs, improving technology access and strengthening supply chains, government officials and industry executives said.
The India-EU FTA, billed by officials as the “mother of all trade deals”, connects markets of nearly 1.9 billion people across India and the EU’s 27 member states, with a combined gross domestic product of more than USD 20 trillion and annual bilateral trade exceeding EUR 120 billion.
Once ratified, the pact will grant preferential market access across 99.6 per cent of electronics trade between the two sides and reduce duties on engineering goods that currently attract tariffs of up to 22 per cent, providing Indian exporters a stronger foothold in the EU’s high-value markets.
Bilateral merchandise trade between India and the EU was valued at about Rs 11.5 lakh crore (USD 136.5 billion) in 2024-25, with India exporting roughly Rs 6.4 lakh crore worth of goods. Trade in services reached Rs 7.2 lakh crore during the year.
Engineering, Electronics And Chip Ambitions Converge Under FTA
India’s engineering exports to the EU stood at around Rs 1.44 lakh crore (USD 16.6 billion), a modest share of the bloc’s nearly USD 2 trillion engineering imports. Officials said tariff reductions could help Indian manufacturers scale exports as part of a push to reach USD 300 billion in engineering shipments by 2030.
For the electronics sector, the agreement opens access to the EU’s USD 744 billion market and is expected to spur investment-led expansion across manufacturing hubs such as Bengaluru, Pune, Noida, Chennai and Hyderabad. The government said the FTA would support scaling of semiconductor fabrication, laptops and industrial electronics, alongside design, R&D, component manufacturing and skills development.
The deal could also support India’s long-term semiconductor ambitions as New Delhi prepares the next phase of its incentive programme.
Minister for Electronics and Information Technology Ashwini Vaishnaw said on Tuesday that the upcoming Semicon 2.0 programme would focus on advanced manufacturing, with a clearly defined roadmap for achieving 3-nanometre and 2-nanometre technology nodes. India aims to rank among the world’s leading semiconductor nations by 2035.
Vaishnaw recently met executives from Dutch chip equipment maker ASML, whose technology is expected to be used at India’s planned semiconductor fabrication facility in Dholera, Gujarat.
Cheaper Equipment, Faster Qualification Cycles Seen As Key Gains
Industry executives said the trade pact could make high-end European equipment more affordable and enable smoother knowledge-sharing.
“The India-EU FTA is a transformative structural enabler for India’s electronics and semiconductor ecosystem,” said Ashok Chandak, President of the India Electronics and Semiconductor Association (IESA). He said European machinery and upstream components typically account for more than 70 per cent of semiconductor fab capital expenditure.
“Eliminating or significantly reducing duties can lower project costs and improve the global competitiveness of India’s fabs and OSAT units,” Chandak said, adding that harmonisation of quality standards and mutual recognition of certifications could shorten qualification cycles for exports.
India’s electronics exports to the EU are currently estimated at around USD 12 billion. Preferential access to the bloc’s electronics market could help support New Delhi’s goal of crossing USD 400 billion in electronics manufacturing by 2030, Chandak said.
Design-led Ecosystem To Benefit From Deeper Cooperation
Nikul Shah, co-founder and chief executive of semiconductor startup IndieSemic, said the agreement would indirectly benefit India’s design-led semiconductor ecosystem by improving access to advanced European tools, components and services.
“Coupled with ongoing India-EU cooperation in critical technologies and supply-chain resilience, the FTA enhances predictability and long-term collaboration for semiconductor design and innovation,” Shah said. |
