India–EU Free Trade Agreement
After nearly two decades of on-and-off negotiations, India and the European Union announced the conclusion of the India–EU Free Trade Agreement at the 16th India–EU Summit on January 27, 2026. On paper, this links India to one of the world’s largest trading blocs, spanning 27 countries and more than 450 million consumers. But in practice, it also ties India more tightly to the Western trading system at a time when global trade itself is being reorganised.
- In 2024–25, goods traded between them were worth about $137 billion, with India exporting $76 billion and importing $61 This also makes the European Union India’s third-largest trading partner.
- India-EU FTA isn’t about opening new avenues of trade. It’s about improving an existing relationship at a time when global supply chains are being reshaped and trade policy is increasingly being driven by geopolitics rather than pure economics.
- Against that backdrop, the India–EU FTA is less about headline tariff cuts and more about positioning India as part of an alternative supply-chain network that reduces over-reliance on a single country.
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India’s top exports to the EU
India’s top exports to the EU are manufactured goods and energy, while our top imports from the EU are high-tech and capital goods such as nuclear reactor parts and aircraft.
FTA slashes or removes tariffs on the vast majority of goods helping indian exports.
- India will eliminate duties on 93% of EU imports by value; the EU will do so for 99% of Indian exports. This is a big boon for labour-intensive and export-oriented industries in India.
- Textiles, apparel, leather goods, footwear, and gems and jewellery are sectors where tariffs still matter a great deal. Eliminating this can swing orders from countries such as Bangladesh and Vietnam, in India’s favour, especially for firms that already operate at scale and meet European quality standards.
- Electronics manufacturing and engineering goods could also gain over time, with the elimination of the up to 10% tariff that currently exists. European firms are actively diversifying supply chains to reduce exposure to China for political and regulatory certainty.
- Another industry that is particularly well-positioned is the rubber industry, where India already enjoys a strong natural advantage as one of the world’s largest producers of natural rubber and a key supplier to global tyre and automotive value chains.In fact, India has already been working towards meeting the EU’s anti-deforestation ruleswith the Bharat Sustainable Natural Rubber (BSNR) initiative, which aims to promote environmentally friendly and ethical rubber production, including reducing deforestation.
- India already supplies a good amount of pharmaceutical products to Europe. An ageing European population will mean greater healthcare demand, which makes this FTA structurally important for our pharmaceutical industry, too. Given the US’ uncertainty, this is quite welcome.
India-EU Free Trade Agreement FTA Challenges
While several Indian sectors stand to gain, others may find this deal slightly challenging.
- Indian automobile manufacturers have long enjoyed heavy protection from European manufacturers through high import duties that kept premium European cars largely out of reach for Indian consumers. This FTA is set to reduce duties from 70-100% to 10-40% in the coming years. While this may expand consumer choice, it could squeeze Indian manufacturers operating in the mid to premium segments. Over time, the pressure could force consolidation or push Indian automakers to accelerate partnerships, technology transfers, and exports to stay competitive.
- India’s wine and spirits industry has also been heavily shielded by steep import duties, which kept European alcohol expensive and limited to a niche audience. But under the India–EU trade deal, these tariffs will be reduced in phases, from 150% to 20%, making European wines and spirits far more price-competitive. This could put pressure on domestic producers, particularly premium Indian whiskey, vodka, and wine brands that have been trying to move up the value chain. With well-established European labels entering at lower price points, Indian players risk losing market share at home before they have fully built global scale or brand recognition.
- A similar challenge could emerge in the gourmet food segment. Products such as cheeses, chocolates, olive oil, and specialty processed foods from Europe enjoy strong brand recall and established quality perceptions. Lower tariffs would make these imports more accessible to Indian consumers, increasing competition for domestic artisanal and small-scale producers. Many Indian gourmet brands are still early in their growth cycle and operate with higher costs and thinner margins, which could make it difficult to compete with large European producers that benefit from scale, subsidies, and mature supply chains.
Effect of India-EU free trade agreement on services and people
Effect of India-EU free trade agreement on services and people.
- The deal goes far beyond tariffs and includes a comprehensive mobility framework for professionals. This means that Indian engineers, IT professionals, doctors, and even traditional medicine experts can find it easier to work short-term in Europe.
- For instance, the agreement allows Intra-Corporate Transferees (ICTs) and Contractual Service Suppliers (CSS) to move between India and EU member countries in dozens of sectors, from software to R&D to education. In fact, the FTA explicitly expands IT and IT-enabled services, professional services, education, and research sectors. So in practice, an Indian IT consultant on an EU project or an engineer sent to a German factory will face fewer visa hurdles.
- Students and young professionals stand to gain, too. The deal includes a framework for student mobility and post-study work. In other words, talented Indian graduates may find it easier to study in Europe and stay on to work. This “brain circulation” can build global skills and networks. Naturally, this also means India is ‘exporting’ people alongside goods.