American rating agency Moody’s has made a big claim regarding the deal between India and EU. The rating agency said that this deal will be beneficial for India in the long run. It will also help India in reducing the impact of tariffs imposed by US President Trump. This deal will also prove to be important for India to expand its trade relations to other countries.
Moody’s Ratings said the trade agreement with the European Union (EU) will help India expand its trade ties and give its exporters access to more markets amid growing uncertainty over high US tariffs.
Deal between India and EU
The Free Trade Agreement (FTA) between India and EU was announced on 27 January. It is likely to be signed and implemented this year. Moody’s said that for India, the deal reflects its continued efforts to selectively expand its trade relationships, while avoiding trade instability caused by recent US tariff decisions.
It said that for the EU, the deal strengthens its economic security by increasing access to fast-growing India, while reducing the risks of over-dependence on a select few countries. Although India expects limited near-term credit impact for the EU and individual member states, this FTA, once ratified and implemented, will be credit positive for both sides by increasing trade volumes, diversifying trade routes and providing access to larger and more stable markets.
These sectors will remain in focus
European sectors like automobile, machinery and equipment and aircraft are likely to benefit more in the long run as there will be deep tariff cuts and increased demand from India. However, its impact is expected to be limited in the short term. On the other hand, it said that this agreement will strengthen India’s access to the EU market in sectors like textiles, leather, marine products and gems and jewellery. Getting priority access to high value markets will also increase India’s participation in the global supply chain, which will benefit small and medium businesses and create new employment opportunities.
Will exporters get benefits?
Moody’s further said that cheap imports of European machinery and components will reduce the cost of raw materials and inputs for Indian companies, which will help in increasing production and goods can be sold at more competitive prices. Additionally, easy access to the world’s third largest car market will enable European automakers to take advantage of India’s growth potential by launching new models.
However, it also said that European imports would create pressure in sectors where there would be direct competition, especially in sectors like high-end machinery, which could impact the profits of domestic companies. Additionally, the full benefit of the FTA will depend on improvements in other related areas in India, such as ease of doing business and simplification of regulations.
Also read- Budget 2026: Understand the difficult words of finance related to the budget in easy language, you will understand the complete ABCD.