India–EU FTA to accelerate IT services and semiconductor growth, industry bodies say

India's recent free trade agreement with the European Union is poised to significantly enhance the growth of the nation's IT services and semiconductor industries. Industry representatives emphasize that this landmark deal will facilitate easier market access, establish digital trade regulations, and reduce import costs for advanced technology equipment, all of which serve as vital advantages for the sector. The agreement, which provides preferential access for trade in goods and services between the world's fourth and second largest economies, shifts the focus for tech companies from mere tariff reductions to benefits such as stability, mobility, and integration into European supply chains. According to Nasscom, the industry body representing Indian IT companies, while there are considerable reductions in duties on goods, the primary advantages for services lie in the opening of markets and the establishment of rules that ensure predictability. This is particularly relevant as the service sector continues to be the fastest-growing component of both economies. Nasscom noted that the agreement could help alleviate non-tariff barriers and streamline cross-border service delivery. It also includes provisions to safeguard privacy, security, and public policy, fostering a more conducive environment for business operations. Indian IT firms are expected to gain increased opportunities in Europe, including simplified cross-border service provision and enhanced mobility for professionals. The agreement also encompasses a commitment to establish a framework for Social Security Agreements with all EU Member States within five years, which could alleviate double contributions for Indian professionals working in Europe. This is a significant step towards enhancing the employment landscape for Indian tech workers abroad. The EU has pledged extensive commitments across 144 service subsectors, notably in IT and IT-enabled services, professional services, and additional business areas. This framework will also address digitally delivered services and provide temporary entry for various professionals, thereby strengthening India's position as a global talent hub. Nasscom highlighted that this agreement reinforces the technological and innovative ties between India and the EU, building upon the existing India-EU Trade and Technology Council. It opens doors for Indian IT firms to benefit from technology transfers, collaborative ventures, and expanded partnerships. Additionally, the agreement includes dedicated chapters for small and medium-sized enterprises (SMEs), offering support through contact points and digital platforms. For India's semiconductor ambitions, the significance of this agreement cannot be overstated. Ashok Chandak, President of the India Electronics and Semiconductor Association (IESA), remarked that the FTA acts as a transformative enabler for India's electronics and semiconductor landscape. By reducing or eliminating duties on European machinery and key components, which account for over 70% of capital expenditures in semiconductor manufacturing, the deal is expected to lower project costs and enhance the global competitiveness of India's fabrication and assembly units. With current electronics exports to the EU hovering around $12 billion, this preferential access to Europe's substantial $750 billion electronics market presents a tremendous growth opportunity. Chandak also noted that the FTA is anticipated to foster collaboration in artificial intelligence, clean technologies, and semiconductors, further propelling India’s technological advancement.