Alert on the India-European Union Free Trade Agreement
On January 27, 2026, India and the European Union (EU) jointly announced the conclusion of the India–EU Free Trade Agreement (FTA).
The conclusion of the FTA marks a historic milestone for both India and EU, which together rank among the world’s five largest economies and account for approximately one-third of global trade.
This comprehensive partnership is expected to create significant trade and investment opportunities, supported by preferential market access and a predictable and inclusive trade environment.
While the detailed provisions of the FTA are awaited, this alert provides a high-level overview of the key aspects based on press materials released by the Indian Government and the EU.
Important Objectives for India
Sectoral Overview of Tariff Liberalization
For Indian Exporters
| Sectors | FTA Tariff Benefits |
| Textiles and apparel | Zero duty for textiles and clothing covering all tariff lines, and reduced tariffs by up to 12%. |
| Leather and footwear exports | Elimination of tariffs from up to 17% to zero across all tariff lines. |
| Mines and minerals | Zero duty across 100% of tariff lines. |
| Chemicals | Zero duty on 97.5% of export basket by value, eliminating duties of up to 12.8%. |
| Medical instruments, appliances and vital supplies | Tariffs of up to 6.7% eliminated across 99.1% of trade lines. |
| Marine exports | Reducing tariffs of up to 26% covering 100% of trade value. |
| Jewellery exports | Tariff elimination of up to 4% across 100% of trade value. |
| Home décor, wooden crafts and furniture | Lower duties of up to 10.5%. |
For EU Exporters
| Sector | Current Tariff | FTA Tariff Benefits |
| Machinery and electrical equipment | Up to 44% | 0% for almost all products |
| Aircraft and spacecraft | Up to 11% | 0% for almost all products |
| Optical, medical, and surgical equipment | Up to 27.5% | 0% for 90% of the products |
| Plastics | Up to 16.5% | 0% for almost all products |
| Pearls, precious stones, and metals | Up to 22.5% | 0% for 20% of the products and tariff reduction for another 36% of the products |
| Chemicals | Up to 22% | 0% for almost all products |
| Motor vehicles | 110% | 10% (quota of 250K per year) |
| Iron and steel | Up to 22% | 0% for almost all products |
| Pharmaceuticals | 11% | 0% for almost all products |
| Wines | 150% | 20% (premium range); 30% (medium range) |
| Spirits | Up to 150% | 40% |
| Beer | 110% | 50% |
Rules of Origin -
- Originating status and preferential access subject to adequate processing or manufacturing being undertaken by the parties to the FTA.
- Product‑Specific Rules (PSRs) designed to align with existing supply chains and allow flexibility to source inputs from global value chains.
- PSRs incorporate MSME‑friendly provisions, including locking‑in quotas for shrimps and prawns, and downstream aluminium products to enable sourcing of non-originating inputs.
- Supports the ‘Make in India’ initiative by providing transition periods for PSRs in the machinery and aerospace sectors.
Trade in Services
The FTA focuses on certainty of market access, non-discriminatory treatment, digitally delivered services, and ease of mobility to provide an impetus to services exports.
- India has secured deeper commitments from the EU across 144 services subsectors, including information technology (IT) and information technology enabled services (ITeS), professional services, education, and other business services.
- India has offered commitments on 102 subsectors such as professional, business, telecommunications, maritime, financial, and environmental services.
Mobility -
The FTA includes a comprehensive mobility framework establishing:
- Assured regime for temporary entry and stay for professionals.
- Ease of movement of employees of Indian corporates established in the EU for all sectors.
- Access for 37 services subsectors (including IT, business, and professional services) for business entities providing contractual service to EU clients.
- Access for 17 services sub-sectors (incl. IT, research and development, and higher education) for independent professionals.
- Framework to enable Social Security Agreements with EU member nations over a five-year horizon, together with a framework supporting student mobility and post-study work opportunities.
Non-Tariff Related Aspects –
- The FTA provides measures to tackle non-tariff barriers through greater regulatory cooperation, transparency, streamlined customs, sanitary and phytosanitary (SPS) procedures.
- The FTA supports intellectual property protections provided under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sand is expected to facilitate cooperation in critical areas like artificial intelligence, clean technologies etc.
- The FTA includes commitments under the Carbon Border Adjustment Mechanism (CBAM), including:
- Most Favored Nation ‑ based flexibilities, if any, granted to third countries,
- Enhanced technical cooperation on recognition of carbon prices,
- Recognition of verifiers, and
- Provisions for financial assistance and targeted support to reduce greenhouse gas emissions and comply with emerging carbon requirements.
Conclusion
The final FTA may take a few months to undergo a technical and legal process of finalization and signing by both parties. Even then, it may be prudent for the industry to identify and start evaluating impacted supply chains and potential opportunities, for further analysis and possible investment/restructuring avenues. Needless to add, a deeper examination and fine-tuning of the strategy would be warranted once the fine print of the FTA is available.
