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Economic Fallout: The EU-India Free Trade Agreement and Pakistans Trade Vulnerability

Author

Listed:
  • Usman Qadir

    (Pakistan Institute of Development Economics, Islamabad)

  • Amjad Masood

    (Pakistan Institute of Development Economics, Islamabad)

Abstract

The European Union-India Free Trade Agreement (FTA), signed on January 27, 2026, marks a strategic development in the global political economy. The agreement offers tariff reductions, thereby facilitating greater access of Indian exports to the EU market across a wide range of goods, with limited coverage of agricultural products. In bilateral trade terms, the FTA holds significant implications for economies, including Pakistan, that are considerably dependent on the European Union as a major export destination. A preliminary analysis based on Computable General Equilibrium (CGE) simulations suggests that Indias exports to the EU could increase by between 21.23% and 33.63% as a result of improved market access and its larger production base. In absolute terms, this translates into an estimated additional export gain of approximately USD 16.7-26.5 billion. Part of this increase would arise from trade diversion away from competing exporters. For Pakistan, exports to the EU are projected to decline by between 0.12% and 0.18% in the short term, equivalent to a modest reduction of roughly USD 11-16 million.

Suggested Citation

  • Usman Qadir & Amjad Masood, 2026. "Economic Fallout: The EU-India Free Trade Agreement and Pakistans Trade Vulnerability," PIDE Policy View Point 2026:52, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:pviewp:2026:52
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