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With this agreement, the EU becomes India’s 22nd FTA partner, strengthening New Delhi’s effort to diversify export markets and reduce dependence on the US amid rising protectionism. Covering approximately 25% of global GDP and impacting approximately 2 billion people, the India-EU FTA is one of the most significant trade agreements ever concluded by India.
Export promotion, security measures for sensitive areas
The agreement provides market access for more than 99% of Indian exports, with immediate or phased elimination of tariffs on a wide range of goods. Major beneficiaries include textiles, apparel, leather, footwear, marine products, engineering goods, gems and jewelery and automobiles, many of which will move to a zero-duty regime once the agreement is implemented.
Indian agriculture and food exports such as tea, coffee, spices, fruits and processed foods are also set to gain better access to EU markets. Also, India has cordoned off sensitive sectors including dairy, poultry, grains and select agricultural products, indicating a balanced negotiating stance.
“From a fiscal perspective, the India-EU FTA balances ambition with pragmatism,” said Pratik Jain, partner, Price Waterhouse & Company LLP. “By ensuring market access for over 99% of Indian exports while protecting sensitive sectors, this agreement marks a shift towards an exclusive trade corridor aligned with digitalization and sustainability.”
CBAM: A strategic win for Indian exporters
One of the most closely watched aspects of the agreement is the progress on the Carbon Border Adjustment Mechanism (CBAM), which has been a major concern for Indian exporters, especially in steel and aluminium.
According to Jain, India has also secured forward-looking MFN assurances along with enhanced technical cooperation on carbon pricing mechanisms and validation of verification processes. “This ensures that Indian exporters will not be unduly penalized during Europe’s green transition,” he said, calling the CBAM-related commitments a “real strategic win for the tax boardroom.”
Tax experts note that this engagement provides greater predictability to exporters as climate-linked trade measures gain prominence globally.
Echoing this view, Saurabh Aggarwal, tax partner, EY India, said FTAs go beyond tariff liberalisation. “The agreement reflects a mature approach to non-tariff barriers, sustainability-linked trade measures and regulatory alignment,” he said. “From a tax and compliance perspective, stronger rules of origin, customs cooperation and digitalization of trade processes will be important to prevent abuse of preferential access and provide certainty to businesses.”
Industry welcomes deal, raises concerns over rules of origin
Industry bodies have broadly welcomed the agreement, while also identifying areas that will require close monitoring during implementation.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) lauded the government’s efforts, noting that many of the concerns of the domestic alcobev industry have been addressed. However, the domestic wine industry expected a higher minimum import price (MIP) range of €3.0–3.5 compared to the agreed upon €2.5.
CIABC Director General Ananth S Iyer said, “The Government of India has done a commendable job in finalizing the India-EU FTA, which will prove beneficial for both trading partners.” “Many industry sectors and services, including IT and ITES, will benefit tremendously, and overall this agreement will be positive for the economy.”
At the same time, Iyer cautioned against the risks of dumping of cheap products and possible abuse of rules of origin. “Strong 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 the treatment of GI-tagged products like Scotch whiskey and cognac to maintain authenticity and trade integrity.
Auto Sector: Controlled Liberalization
In the automobile segment, FTA adopts a carefully calibrated approach. European carmakers will be allowed to sell a limited number of high-end models in India, while India will continue to emphasize Make in India and local manufacturing.
Industry watchers expect Indian consumers to benefit from better technology and wider choices without reducing domestic production capacity.
business approach
India’s merchandise exports to the EU currently stand at about $75.85 billion, a figure that is expected to grow significantly by 2032 as tariff barriers are reduced and supply chains deepened. Overall bilateral trade is projected to expand steadily, helping Indian exporters address geopolitical risks and penetrate deeper into European value chains.
Combining recent agreements with the UK, EFTA, UAE, Australia and New Zealand, the India-EU FTA effectively opens up almost the entire European market to Indian businesses.
As Agarwal summarized, “In 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 expand across Europe.”