With the deal, the European Union becomes India’s 22nd FTA partner, reinforcing New Delhi’s push to diversify export markets and reduce dependence on the US amid rising protectionism. Covering nearly 25% of global GDP and impacting close to 2 billion people, the India–EU FTA ranks among the most significant trade agreements concluded by India to date.
Boost to exports, safeguards for sensitive sectors
The agreement provides market access for over 99% of Indian exports, with immediate or phased elimination of tariffs across a wide basket of goods. Key beneficiaries include textiles, apparel, leather, footwear, marine products, engineering goods, gems and jewellery and automobiles, many of which will move to a zero-duty regime once the pact comes into force.
Indian farm and food exports such as tea, coffee, spices, fruits and processed foods are also set to gain improved access to EU markets. At the same time, India has ring-fenced sensitive sectors including dairy, poultry, cereals and select agricultural products, reflecting a calibrated negotiating stance.
“From a fiscal perspective, the India–EU FTA balances ambition with pragmatism,” said Pratik Jain, Partner, Price Waterhouse & Co. LLP. “By securing market access for more than 99% of Indian exports while safeguarding sensitive sectors, the agreement marks a shift towards a specialised trade corridor aligned with digitisation and sustainability.”
CBAM: A strategic win for Indian exporters
One of the most closely watched aspects of the agreement is progress on the Carbon Border Adjustment Mechanism (CBAM), which has been a key concern for Indian exporters, particularly in steel and aluminium.
According to Jain, India has secured forward-looking MFN assurances, along with enhanced technical cooperation on the recognition of carbon pricing mechanisms and verification processes. “This ensures Indian exporters are not unfairly penalised during Europe’s green transition,” he said, calling CBAM-related commitments a “real strategic win for the tax boardroom.”
Tax experts note that this engagement provides exporters greater predictability as climate-linked trade measures gain prominence globally.
Echoing this view, Saurabh Agarwal, Tax Partner, EY India, said the FTA goes well beyond tariff liberalisation. “The agreement reflects a maturing approach to non-tariff barriers, sustainability-linked trade measures and regulatory alignment,” he said. “From a tax and compliance standpoint, robust rules of origin, customs cooperation and digitalisation of trade processes will be critical to prevent misuse of preferential access and provide certainty to businesses.”
Industry welcomes deal, flags rules of origin concerns
Industry bodies have broadly welcomed the agreement, while flagging areas that will require close monitoring during implementation.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) lauded the government’s efforts, noting that several concerns of the domestic alcobev industry have been addressed. However, the domestic wine industry had hoped for a higher Minimum Import Price (MIP) threshold of €3.0–3.5, compared to the €2.5 agreed upon.
“The Indian government has done commendable work in finalising the India–EU FTA, which will prove beneficial for both trading partners,” said Anant S Iyer, Director General, CIABC. “Many industry sectors and services, including IT and ITES, will benefit tremendously, and overall the agreement will be positive for the economy.”
At the same time, Iyer cautioned against the risk of dumping of cheaper products and potential misuse of the rules of origin. “Robust and enforceable rules of origin are essential to prevent third-country products from entering India through indirect routes, leading to unfair competition and revenue loss,” he said.
CIABC has also sought reciprocity from the EU, particularly the removal of non-tariff barriers on Indian spirits, and clarity on treatment of GI-tagged products such as Scotch whisky and Cognac to preserve authenticity and trade integrity.
Auto sector: Controlled liberalisation
In the automobile segment, the FTA adopts a carefully calibrated approach. European carmakers will be allowed to sell a limited number of high-end models in India, while India continues to push Make in India and local manufacturing.
Industry watchers expect Indian consumers to benefit from better technology and wider choices, without undermining domestic production capacity.
Trade outlook
India’s goods exports to the EU currently stand at around $75.85 billion, a figure expected to rise significantly by 2032 as tariff barriers fall and supply chains deepen. Overall bilateral trade is projected to expand steadily, helping Indian exporters hedge geopolitical risks and tap deeper into European value chains.
Taken together with recent agreements with the UK, EFTA, UAE, Australia and New Zealand, the India–EU FTA effectively opens up almost the entire European market for Indian businesses.
As Agarwal summed up, “Over the medium term, the agreement should enhance India’s export competitiveness, support supply chain diversification and provide a more predictable framework for Indian companies to scale across Europe.”
