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EU-India free trade deal likely to boost manufacturing sector
The most important benefit which will accrue to Indian industry will come from multinational automakers who will increasingly use the country as an export base
- PUBLISHED: Wed 11 Feb 2026, 11:07 PM
- By:
- HP Ranina
Question: Will the recent free trade agreement between European Union and India give a jumpstart to the Indian economy? Specifically, how will it benefit the Indian manufacturing sector?
ANSWER: The India-EU Free Trade Agreement will catalyse the next phase of growth for Indian industry by enabling long term investment flows, technology collaboration and greater export competitiveness. The biggest opportunity will be for Indian exports to integrate into the European supply chain. The agreement spells out quota-based mutual concessions alongwith phased reductions in duties. Within the next two years, 90.7% of India’s exports will move to zero tariffs, covering a wide range of products including chemicals, base metals, leather, textiles and garments, pharmaceuticals, marine products, gems and jewellery, etc. The FTA will materially improve market access for Indian suppliers who will integrate into the European value chains.
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The most important benefit which will accrue to Indian industry will come from multinational automakers who will increasingly use the country as an export base for both electric and internal combustion engine vehicles. Auto component manufacturers in India will secure the maximum benefits and technological advantages, making the quality of their products on par with international standards. Flow of foreign direct investment is set to get a momentous boost as the number of joint ventures will increase in the next five years. The removal of tariffs on labour intensive industries will boost employment opportunities for low skilled workers. Therefore, the Indian economy will gain substantially as a result of this FTA by improving the quality of manufactured products on account of technological collaborations and a boost to foreign exchange earnings on account of stable capital inflows and higher export revenues.
Question: The IPO market in India has been booming during the last two years. However there are concerns that the funds raised may be diverted by promoters for purposes other than that stated in the offer document. Are any safeguards being taken to ensure that this does not happen?
ANSWER: At present, the Securities and Exchange Board of India makes it mandatory for equity issuers to appoint a credit rating agency which would track end-use of the proceeds of initial public offerings. These agencies are required to file quarterly reports in a prescribed format until the equity raised is fully utilised. These reports have to be placed before the Audit Committee of the company.
It is now proposed by the regulator to strengthen the monitoring process by directing rating agencies to provide the report to stock exchanges. This end-use monitoring requirement would ensure that equity issuers use the proceeds only for the purpose mentioned in the offer document. The new guidelines will therefore protect the interest of all investors and ensure that the funds are fully utilised for productive purposes including creation of new capital assets.
Question: My grandchildren in India need to be provided for and I wish to make gifts to them from my NRE account. I have been advised that investment in mutual funds would provide for their higher education. I am not sure whether minors can invest in units of mutual funds. Please advise.
ANSWER: Mutual fund houses accept investments in the name of a minor child in any scheme-equity, debt, hybrid, etc. The child will be shown as the sole holder and the guardian who will sign the documents would be either a parent or a legal guardian. Such person will manage the account until the child reaches the age of 18. Thereafter, the account holder will have full control over the investment. For purchasing units of a mutual fund in a child’s name, proof of the child’s age like a birth certificate, passport or PAN card of the child will have to be furnished. The parent/guardian would also have to provide the requisite KYC documents.
The funds for investment can be routed through the child’s own bank account or the parent’s/guardian’s account. All transactions like lumpsum investment, contributions to systematic investment plans, or systematic transfer plans would be conducted by the guardian until the child becomes an adult.
On attaining the age of 18, the account holder will be required to submit an application form alongwith the prescribed documents to change the status of the folio from minor to major. Please note that income earned on the units of the mutual fund earned by the minor child will be added to the income of such parent whose taxable income is higher during the financial year. After reaching the age of 18, these clubbing provisions will cease to apply and the account holder himself will be liable to tax on the income earned. Thus, investing in mutual funds in a child’s name is emerging as a preferred route for parents/grandparents to earmark long term savings for education, marriage or for providing financial security to the child.
The writer is a practising lawyer, specialising in corporate and fiscal laws of India.