Mother of all deals offers TN big gains, tough choices

CHENNAI: The India-European Union Free Trade Agreement (FTA) inked on Tuesday is being widely seen as a game-changer for Tamil Nadu’s export-driven economy, with industry leaders expecting a strong boost for labour-intensive sectors such as leather, textiles, auto components and engineering goods.

At the same time, exporters, especially MSMEs, are flagging concerns around high operating costs and stringent compliance norms that could determine how much of the promised gains ultimately flow to the State. TN, one of India’s most manufacturing-intensive and export-oriented States, has deep trade linkages with the EU, which remains a key destination for high-value and compliance-heavy products.

The FTA is expected to provide tariff relief, improve market access and enhance integration with European supply chains at a time when global trade is undergoing a major realignment.

Welcoming the agreement, M Rafeeque Ahmed, chairman of the Farida Group, said the deal could significantly sharpen the competitiveness of India’s leather industry, where TN plays a dominant role. “The EU is the main market for leather exports for the country, accounting for nearly 60 per cent of footwear, leather garments and accessories exported to that region,” he told DT Next.

In value terms, he said, the EU market works out to about $3.5 to 4 billion.“The deal sets the stage for making the leather industry more competitive and aggressive, as exporters would now look at opportunities to expand market share,” Ahmed said, adding that TN alone accounts for around 60 per cent of India’s leather exports to the EU.

For nearly 70 per cent of TN’s 150plus exporters, Europe represents a sizeable and diversified market, offering scope to export a wide range of leather products.

The agreement is also expected to benefit other labour-intensive sectors concentrated in the State. Pankaj Chadha, chairman of the Engineering Export Promotion Council (EEPC), said the pact augurs well for textiles, leather and auto components, all of which have strong clusters in TN. “The general mood is good, and the message has gone out that the deal can be done while keeping agriculture and dairy out of the ambit. That is the biggest takeaway,” he told DT Next.

However, Chadha cautioned that while a basic understanding has been reached, it could take another six months to complete the overall modalities, with the actual rollout likely only from 2027.

He noted that India’s recent free trade agreements with other countries had helped pave the way for the EU pact, opening access to a mature, regulation-intensive market. “We are still waiting to know the finer details of the last three contentious chapters to understand what led to the completion of the last mile of the marathon,” he said.

From a supply-chain perspective, the FTA is being seen as strategically timed. R Dinesh, executive chairman of TVS Supply Chain Solutions, said the agreement comes amid a fundamental reset of global supply chains. “The PM’s call for India and Europe to act as a ‘double engine of growth’ aptly captures the opportunity ahead,” he said, adding that deeper alignment on standards and digital trade would accelerate cross-border manufacturing, logistics and supply-chain collaboration.

European automakers with a strong footprint in Tamil Nadu struck a cautiously optimistic note.

Balbir Singh Dhillon, brand director, Audi India, said the proposed FTA has the potential to deepen economic ties and support innovation, supply-chain efficiency and technology collaboration. However, he said it would be premature to assess implications for pricing or product strategy until the final terms and implementation timelines are clear. For MSMEs, the agreement offers both relief and risk.

KE Raghunathan, national chairman of the Association of Indian Entrepreneurs (AIE), said the pact unORFNV SUHIHUHQWLDO DFFHVV WR D WULOlion-plus EU market, with tariffs eliminated or reduced on over 99 per cent of Indian export value.

This assumes significance after months of stress caused by steep US tariffs, which disrupted supply chains for small exporters. Yet, Raghunathan cautioned that compliance costs and non-tariff barriers could blunt the benefits if not addressed urgently.

He pointed out that many beneficiary sectors are concentrated in TN and urged the State to focus on reducing high operating costs. Without timely intervention, he warned, exporters risk an “operation successful but beneficiary died” outcome.