The India–EU FTA: A Landmark Agreement, but What Changes?

India and the European Union have built a strong trading relationship over the years, with bilateral trade in goods reaching €118 billion in 2025. Both markets are offering significant opportunities for businesses, with India providing access to a growing consumer and manufacturing base, while the EU provides a large and established market for the Indian exporters.

Building on the relationship, the conclusion of negotiations for the India–EU Free Trade Agreement on 27^th January 2026 marks an important development in their economic relationship. The agreement seeks to make trade between the two markets easier by reducing import duties, improving market access and addressing other barriers to cross-border business. Its coverage extends beyond goods to include services and several other areas of economic cooperation.

For businesses in India, this could create new opportunities to expand into European markets. At the same time, greater access for European companies could increase competition within India. The extent to which businesses benefit will depend not just on the concessions offered under the agreement, but also on their ability to compete and meet the requirements of the respective markets.

Where Things Stand: From Conclusion to Implementation

Before looking at the benefits of the agreement, it is important to understand where the process currently stands. India and the EU first began negotiating a Free Trade Agreement in 2007, but due to delays caused of geopolitical situations, both sides eventually announced the conclusion of negotiations on 27 January 2026.

However, the conclusion of negotiations does not mean that the agreement is already in force. On 11 September 2026, the European Commission submitted the agreement for approval and signing by the Council of the EU. The agreement must still undergo the necessary approval, signing and ratification procedures on both sides.

The FTA is currently expected to come into force around April–May 2027, subject to the completion of these formalities.

Understanding the Agreement

The scale of the agreement becomes clearer when we look at the existing trade between the two markets and the concessions being offered.

In FY 2024–25, India's trade in goods with the EU stood at USD136.54 billion, with exports of USD75.85 billion and imports of USD60.68 billion. Trade in services added another USD83.10 billion in 2024.

Under the agreement, the EU will provide preferential access across 97% of its tariff lines, covering 99.5% of India's exports by value. More importantly, duties on products accounting for 90.7% of India's export value will be removed from the start of the agreement.

India, on the other hand, has offered preferential access across 92.1% of its tariff lines, covering 97.5% of EU exports. However, only 30.6% of the value of EU exports will receive immediate duty-free access, with most of the remaining reductions spread over 5, 7 and 10 years.

This difference is worth noting. Indian exporters will get faster access to the European market, while European businesses will see their access to India improve gradually. This also gives Indian industries some time to adjust to increased competition from European products.

Particulars	EU's offer to India	India's offer to EU
Tariff lines covered	97%	92.1%
Export value receiving preferential access	99.5%	97.5%
Duty-free from day one	90.7%	30.6%
Main phase-out period	3–5 years	5–10 years

What Indian Businesses Stand to Gain - Export Perspective

The agreement creates significant opportunities for Indian exporters, particularly in sectors where high European import duties have affected their competitiveness. More than US$33 billion worth of Indian exports across key labour-intensive sectors will receive zero-duty access, subject to the agreement coming into force.

• Textiles and Apparel: Duties of up to 12% will be removed across all tariff lines, giving Indian manufacturers better access to the EU's large textile and apparel market.

• Leather and Footwear: The removal of duties of up to 17% could help Indian manufacturers compete more effectively with other major exporting countries.

• Marine Products: With existing duties reaching 26%, Indian seafood exporters stand to benefit from lower costs and improved access to European buyers.

• Chemicals, Plastics and Rubber: The removal of duties of up to 12.8% on chemicals and 6.5% on plastics and rubber will improve export opportunities for Indian manufacturers.

• Gems and Jewellery: The removal of duties of up to 4% will further support Indian jewellery manufacturers and exporters supplying the European market.

Key tariff concessions for Indian exporters

Sector	Existing EU duty (up to)	Duty-free at entry into force*
Textiles and apparel	12%	100%
Leather and footwear	17%	100%
Marine products	26%	94.4%
Chemicals	12.8%	59.3%
Plastics and rubber	6.5%	62.7%
Gems and jewellery	4%	96.6%
Base metals	10%	79.1%
Railway, aircraft, ships and boats	7.7%	88.2%
Furniture and lighting	10.5%	94.2%
Toys and sports goods	4.7%	100%

 

What Indian Businesses Stand to Gain - Import Perspective

While Indian exporters gain better access to Europe, the agreement also provides European companies with greater access to the Indian market. Import duties on several industrial, automotive, pharmaceutical and consumer product categories will be reduced or eliminated, it is phased and timelines differ across sectors.

• Machinery and Industrial Equipment: Import duties of up to 44% will be gradually eliminated, making European machinery and equipment more accessible and competitive in India.

• Chemicals and Pharmaceuticals: Duties of up to 22% on chemicals and 11% on pharmaceuticals will be removed on almost all covered products.

• Automobiles and Auto Components: Import duties on cars will fall from as high as 110% to 10% within an annual quota of 250,000 vehicles. Duties on most auto components will also be phased out.

• Medical Equipment: Around 90% of medical equipment tariff lines will eventually become duty-free, improving market access for European manufacturers.

• Wines, Spirits and Food Products: Duties on wines will reduce to 20–30%, spirits to 40% and beer to 50%. Olive oil will also become duty-free.

Key tariff concessions for European exporters

Product / Sector	Existing Indian duty (up to)	Concession under FTA
Machinery and electrical equipment	44%	0% on almost all products
Chemicals	22%	0% on almost all products
Pharmaceuticals	11%	0% on almost all products
Medical equipment	27.5%	0% on 90% of products
Automobiles	110%	10% within quota of 250,000 vehicles
Wines	150%	20–30%
Spirits	150%	40%
Beer	High tariffs	50%
Olive oil	40–45%	0%

Note: Most concessions are subject to phased implementation.

Beyond Tariffs: Rules of Origin and Regulatory Requirements

Lower import duties will not automatically mean that every Indian exporter can benefit from the agreement. Products must meet specific Rules of Origin (RoO) requirements to qualify for preferential tariffs. These requirements vary by product and may involve minimum value addition or specific manufacturing processes.

The agreement also introduces a self-certification mechanism, allowing exporters to declare the origin of their products through a Statement on Origin, supported by the DGFT's digital platform.

Additionally, Indian exporters will still need to comply with European quality, technical and product safety standards. The ability to meet these requirements will be just as important as the tariff concessions themselves.

ILO Perspective: Sectoral Opportunities, European Investment and M&A

The India–EU FTA could create opportunities beyond direct exports, particularly by encouraging European companies to expand their presence in India. Reduced import duties on machinery, industrial components and other products could lower operating costs for European manufacturers looking to establish or expand manufacturing operations in the country.

We see potential opportunities in sectors such as specialty chemicals, automotive components, medical equipment, textiles and engineering. These sectors could attract greater interest from European strategic investors looking to access India's manufacturing capabilities, domestic market and supply-chain network.

The agreement could also support India's position as an alternative manufacturing destination as European companies look to diversify their supply chains and reduce dependence on existing sourcing markets. This will create opportunities for Indian businesses to enter international supply chains through partnerships, joint ventures and acquisitions.

From an investment perspective, the agreement could create opportunities for both inbound investment and cross-border M&A. However, businesses and investors will still need to assess regulatory requirements, sector-specific risks and investment protection arrangements before making long-term commitments.

The Real Test: FTA Utilisation and MSME Readiness

While the agreement creates opportunities for Indian businesses, one of the key challenges will be how effectively they use the benefits available. India has historically had relatively low utilisation of its existing FTAs, with estimates suggesting that only 30–40% of eligible exports make use of preferential duty benefits.

For smaller businesses, particularly MSMEs, understanding the agreement and meeting its requirements will be important. Simply having access to lower duties does not guarantee that exporters will be able to claim them.

Businesses should start preparing by:

• Identifying the relevant product codes (HS codes) and applicable tariff reductions.
• Checking whether their products meet the Rules of Origin requirements.
• Maintaining supplier records and necessary origin documentation.
• Registering on the DGFT platform for origin certification.
• Reviewing European quality, safety and regulatory requirements.
• Assessing the potential duty savings against the cost of compliance.

Businesses that prepare in advance will be better positioned to take advantage of the agreement once it comes into force, rather than trying to understand the requirements after new trade opportunities emerge.