The recently signed free trade agreement between India and the European Union, which has been described as the “mother of all deals”, is expected to boost India’s manufacturing strength, support exports and strategic capacity, according to the Economic Survey 2025-26 tabled in Parliament by Union finance minister Nirmala Sitharaman on Thursday.
Notably, the agreement cuts duties on nearly 97 per cent of EU goods coming into India. For Indian exporters, the FTA offers special entry to 97 per cent of tariff lines for products in EU markets, which together make up 99.5 per cent of the total trade value. Follow live updates related to Economic Survey here.
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Also mentioned in the Economic Survey is that from April 1 to January 22, 2026, the Indian rupee weakened by about 6.5 per cent against the US dollar. It added that the fall came as overseas investment flows dried up and said the currency underperformed last year.
What Economic Survey reveals about India-EU FTA
The survey says the deal expands access for India’s labour-intensive manufactured goods and helps the country connect more closely with Europe’s technology and production strengths.
It added that the FTA with Europe could back efforts there to rebuild parts of its manufacturing sector, while also improving India’s ability to compete in production and maintain strong exports and strategic capacity.
It is worth noting that the deal would account for 25 per cent of the global gross domestic product and link a market of more than 1.9 billion people, HT reported earlier. The EU remains India’s largest trading partner, with goods trade valued at $135 billion in 2023-24.
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The FTA is expected to boost trade between India and EU member states at a time when many nations are working to reduce risk amid trade disruptions due to the policies of US President Donald Trump.
Details shared by the European Union show that duties on 96.6 per cent of EU goods exports will be cut or removed, potentially saving up to €4 billion in charges on European products each year.
Indian rupee underperformed in 2025: Economic Survey
The Indian rupee underperformed in 2025, the survey said. It added that India runs a trade deficit in goods, and the surplus from services and remittances is not enough to cover that shortfall.
It said India relies on foreign investment flows to keep its balance of payments in good shape. When these inflows slow, the stability of the rupee is affected, the survey said.
However, the survey added that the rupee’s current value does not truly show the strength of India’s strong economic base, even though it is “punching below its weight”.
“Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now. However, it does cause investors to pause. Investor reluctance to commit to India warrants examination,” it said.
Between April 1 and January 22, 2026, the Indian rupee fell by around 6.5 per cent against the US dollar. It added that the change in the Indian currency has remained steady.
Over the medium to long term, the survey said exchange rates are likely to be shaped by deeper factors such as gains in productivity, a shift in exports towards higher-value goods and services, closer links to Global Value Chains (GVCs), and a stable policy setting, rather than short-term swings.
On Thursday, the rupee was trading at 92.00 against the US dollar in early deals, setting a fresh record for the third time in under a week. On Wednesday, the currency slipped by 31 paise to close at 91.99 against the US dollar.
The rupee has dropped 2% so far this year and close to 5% since Trump introduced high tariffs on India’s exports to its largest market, HT reported earlier.