India and the European Union at 27 (EU) sealed negotiations on a long-pending free trade agreement on January 27, opening broad market access for goods, services and investments. Described by both sides as the world’s largest bilateral trade deal, the agreement is expected to significantly reshape trade flows once implemented, likely at least a year after signing.
India’s bilateral merchandise trade with the EU stood at $136.5 billion in 2024-25, with exports of $75.85 billion and imports of $60.68 billion, making the bloc India’s largest trading partner. Under the FTA, India is expected to ultimately gain $75 billion in additional exports, while the EU expects its shipments to India to double by 2032 as tariffs are reduced or eliminated.
How India will benefit
For India, the main advantage is preferential access to the European market for more than 99 percent of its exports. Tariffs will be removed immediately on 90 percent of Indian exports once the deal comes into force, and will increase to 93 percent over seven years. An additional six percent of exports will benefit from tariff reductions or quota-based access.
This broad liberalization is expected to provide a decisive boost to India’s manufacturing and labour-intensive sectors, supporting export growth, job creation and MSME participation in global value chains. The FTA also grants India access to 144 EU services subsectors, including IT, professional and technical services, as well as enhanced mobility arrangements and uncapped student movement.
Sector benefits: duty-free access
Several key sectors should benefit duty-free access under the India-EU FTA, highlighting the extent of tariff liberalization that India has achieved in the European market.
Marine products, which currently face duties of up to 26 percent, are expected to see a significant increase, thereby improving the competitiveness of Indian seafood exports in EU markets. Footwear and leather goods, taxed at around 17 percent, are expected to see renewed export momentum after years of pressure from Southeast Asian competitors who enjoyed preferential access.
The clothing and textile sector, facing tariffs of 11 to 12 percent, is one of the biggest winners. Duty-free entry could help Indian exporters regain market share from rivals such as Bangladesh and Vietnam in the EU’s $263.5 billion textile import market. Chemicals, which currently face tariffs of around 12.8 percent, base metals at 10 percent and consumer goods at 10.5 percent will also see a sharp improvement in their price competitiveness.
Lower tariffs on gems and jewelry (4 percent), toys and sporting goods (4.7 percent), and railway products and ships (7 percent) are expected to unlock new demand and longer-term supply contracts with European buyers. Together, these sectors account for around $33-35 billion of Indian exports to the EU and are expected to be among the first beneficiaries once the deal is implemented.
How the EU will benefit
In return, India agreed to gradually liberalize tariffs on 92.1 percent of the market. EU tariff linescovering 97.5 percent of EU exports by value. European exporters of machinery, chemicals, pharmaceuticals, medical devices, aircraft components, plastics, iron and steel – many of which face Indian duties of 11 to 44 percent – stand to gain from lower costs and deeper market access.
The deal also opens the door to EU agricultural and consumer products, including fruits like apples, pears and kiwis, quota-based wines and spirits, and processed foods like chocolates and confectionery, benefiting exporters from countries including France, Italy, Spain and Belgium.
Automotive, steel and climate sectors
The automobile remains one of the most sensitive chapters. EU cars priced below €15,000 are excluded, while high-end vehicles will benefit from gradual tariff reductions under quotas, with duties eventually falling to 10 per cent over five years. Electric vehicles only have limited access from the fifth year onwards. India, in particular, obtained a vehicle export quota to the EU 2.5 times higher than that it offered to European car manufacturers.
Steel trade will be shaped by the new EU quota regime, while the climate rules of the EU Carbon Border Adjustment Mechanism will apply uniformly. Even though India did not get an exemption, it will benefit from technical assistance and any flexibility given to other partners.
Overall, the India-EU FTA marks a structural shift in bilateral trade, with India gaining momentum in exports and employment, and the EU securing long-term access to one of the world’s fastest-growing major economies.
