Gains for Indian Services: An Analysis of the India–EU FTA

Amid deepening geopolitical rifts and heightened focus on free trade agreements (FTAs), India and the European Union’s (EU) broad-based FTA has garnered significant interest. Of special interest in this FTA is trade in services, as services are a major contributor to GDP and trade flows in the two economies. However, services trade between these two partners is marked by differences across sub-sectors, modes of trade, regulatory barriers and specific interests. This study uses bilateral revealed comparative advantage and gravity modelling analysis to explore the opportunities and challenges for India under this FTA. Using disaggregated data spanning 2010–2019, we construct different trade indicators, to identify the potential sectors of benefit for India as well as potential partners among EU countries, which could prove valuable for FTA negotiations. We find that under services trade liberalisation by the EU, the gains for India’s exports will be approximately US$1.3b, but the potential complementary gains from signing an FTA with a high income countries in terms of greater integration with global value chains, boost in servicification opportunities in manufacturing and enhanced investment and technological flows may be enough motivation for India to negotiate the terms astutely. JEL Codes: F13, F14, F15, F17