This agreement positions the European Union as India’s 22nd FTA partner, bolstering New Delhi’s efforts to diversify export markets and lessen reliance on the US in an era of rising protectionism. Encompassing nearly 25% of global GDP and affecting around 2 billion people, the India–EU FTA stands among the most important trade deals India has secured to date.
Export enhancement, protection for sensitive sectors
The agreement opens market access for over 99% of Indian exports, with immediate or phased removal of tariffs on a wide range of products. Major beneficiaries include textiles, clothing, leather, footwear, seafood, engineering products, precious stones and jewellery, and automobiles, many of which will enjoy a zero-duty regime once the agreement is activated.
Indian agricultural exports, including tea, coffee, spices, fruits, and processed foods, are also set to gain improved access to EU markets. Concurrently, India has protected sensitive sectors such as dairy, poultry, grains, and certain agricultural products, illustrating a strategic negotiating stance.
“From a financial perspective, the India–EU FTA harmonizes ambition with practicality,” stated Pratik Jain, Partner at Price Waterhouse & Co. LLP. “By securing market access for more than 99% of Indian exports while safeguarding sensitive sectors, the agreement signifies a shift toward a specialized trade corridor that aligns with digitization and sustainability.”
CBAM: A strategic achievement for Indian exporters
A focal point of the agreement is the progress regarding the Carbon Border Adjustment Mechanism (CBAM), which has been a significant concern for Indian exporters, especially in the steel and aluminium sectors.
As Jain noted, India has obtained forward-thinking MFN assurances and enhanced technical collaboration on recognizing carbon pricing methods and verification processes. “This guarantees that Indian exporters are not unjustly penalized during Europe’s green transition,” he remarked, labeling CBAM-related commitments as a “genuine strategic win for the tax boardroom.”
Tax experts emphasize that this engagement provides exporters with greater predictability as climate-related trade measures rise in importance globally.
Echoing these sentiments, Saurabh Agarwal, Tax Partner at EY India, observed that the FTA surpasses mere tariff liberalization. “The agreement signifies an evolved approach to non-tariff barriers, sustainability-related trade practices, and regulatory alignment,” he asserted. “From a tax and compliance perspective, robust rules of origin, customs cooperation, and trade process digitization will be essential to deter misuse of preferential access and provide certainty to businesses.”
Industry welcomes agreement, raises rules of origin concerns
Industry groups have largely expressed support for the agreement, while highlighting areas that necessitate careful oversight during its implementation.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) praised the government’s initiatives, indicating that many issues facing the domestic alcobev industry have been addressed. However, the domestic wine sector had anticipated a higher Minimum Import Price (MIP) threshold of €3.0–3.5, instead of the €2.5 agreed upon.
“The Indian government has done commendable work in finalizing the India–EU FTA, which will be advantageous for both trading partners,” remarked Anant S Iyer, Director General of CIABC. “Numerous industry sectors and services, including IT and ITES, will gain substantially, and overall the agreement will benefit the economy.”
Nonetheless, Iyer warned about the potential risk of dumping cheaper products and the possible misuse of rules of origin. “Effective and enforceable rules of origin are crucial to prevent third-country products from entering India through indirect routes, resulting in unfair competition and revenue loss,” he cautioned.
CIABC has also requested reciprocity from the EU, particularly in the elimination of non-tariff barriers on Indian spirits, along with clarity on the treatment of GI-tagged products like Scotch whisky and Cognac to maintain authenticity and trade integrity.
Auto sector: Measured liberalization
In the automotive sector, the FTA employs a meticulously balanced approach. European car manufacturers will be permitted to sell a limited number of premium models in India, while India continues to promote local manufacturing under the Make in India initiative.
Industry analysts anticipate that Indian consumers will benefit from advanced technology and broader choices, without compromising domestic manufacturing capabilities.
Trade forecast
India’s goods exports to the EU currently amount to approximately $75.85 billion, a figure projected to increase significantly by 2032 as tariff barriers diminish and supply chains deepen. Overall bilateral trade is expected to grow steadily, aiding Indian exporters in mitigating geopolitical risks and integrating further into European value chains.
Alongside recent agreements with the UK, EFTA, UAE, Australia, and New Zealand, the India–EU FTA essentially opens nearly the entire European market to Indian enterprises.
As Agarwal concluded, “In the medium term, the agreement should bolster India’s export competitiveness, support supply chain diversification, and establish a more predictable framework for Indian companies to expand across Europe.”
