India-EU FTA: Tariff cuts, textiles boost; What’s in the deal and what could still derail it
The deal could reshape how both sides trade goods and services, but the toughest part may still lie ahead: getting it ratified in Europe and ensuring the fine print delivers real gains
- Jan 26, 2026,
- Updated Jan 26, 2026 12:41 PM IST
India and the European Union appear ready to put a long-running set of negotiations to bed, with both sides expected to unveil a near-finished free trade agreement at the India–EU Summit in New Delhi on Tuesday. The push comes at a time when trade barriers are rising globally, and both partners are seeking clearer market access and more predictable rules.
1) The first hurdle comes after the handshake
Even if leaders announce the agreement this week, it won’t take effect immediately. The deal would still need approval from the European Parliament, a step that can take a year or more and could become politically contentious. Recent moves in Brussels to legally challenge another major trade pact underline how easily parliamentary processes can slow timelines or complicate outcomes.
Notably, some large pieces are being kept outside the core package for now. Investment protection and geographical indications are being negotiated separately, meaning the main FTA is tighter in scope, centred on trade in goods, services and the rulebook that governs them.
2) Why are both sides pushing now
For New Delhi, the trade agreement fits into a broader strategy: building alternative export routes and securing stable partners as protectionism spreads across major economies. If finalised, it would add to a growing list of trade pacts India has pursued in recent years.
For the EU, the logic is partly economic and partly strategic. A deal with India supports supply-chain diversification, helps reduce over-dependence on China, and deepens access to one of the world’s fastest-expanding large economies, currently valued at about $4.2 trillion.
3) What India could gain, and why it matters
Europe already sits near the top of India’s trade relationships, alongside the United States and China. In 2024/25, total trade in goods and services between India and the 27 EU members crossed $190 billion. India’s exports to Europe included roughly $76 billion worth of goods and about $30 billion in services.
While the EU’s average tariff levels on Indian products are relatively modest, several job-heavy sectors still face meaningful duties. Textiles and garments, for instance, are taxed at around 10%, according to Global Trade Research Initiative, a Delhi-based think tank.
A deal could help Indian exporters regain competitiveness after the EU began scaling back benefits under its Generalised System of Preferences in 2023, a shift that hit categories such as apparel, pharmaceuticals and machinery. The timing has also become more urgent for Indian firms because of new cost pressures created by steep US tariffs affecting certain products since late August, pushing businesses to look harder at alternative markets.
India’s ask is not limited to merchandise exports. It is also pushing for smoother access for skilled professionals and improved opportunities for IT and services exports.
4) What Europe wants from India
From the EU’s perspective, India remains a tougher market to sell into than many other large economies, mainly because of higher import duties. EU goods exports to India in 2024/25 were worth about $60.7 billion, and they faced a weighted-average tariff of around 9.3%.
European negotiators see the biggest upside in sectors where duties are high and demand is growing. That includes automobiles and auto components, as well as chemicals and plastics. If tariffs fall meaningfully, EU firms could find larger openings in cars, machinery, aircraft and chemical products, alongside better access in services, government procurement, and investment pathways.
5) The deal-breakers are still the sensitive sectors
To keep the negotiations workable, some politically sensitive items have been excluded entirely from the agreement, agriculture and dairy among them.
Another key friction point is the overall coverage of tariff elimination. The EU has been seeking near-total liberalisation across goods, while India has signalled it is willing to go less far, closer to nine-tenths rather than near-complete removal.
Beyond the headline numbers, certain categories remain politically and economically delicate in India. Automobiles and items such as wine and spirits continue to trigger concerns about domestic industry exposure. India has been weighing gradual reductions, phased schedules or capped import volumes instead of sharp duty cuts, citing risks to local manufacturing.
6) The biggest contest is about services and rules
This agreement is also a rules negotiation, not just a tariff exercise. India is seeking “data-secure” recognition under EU frameworks, easier movement for professionals, and measures that reduce the burden of double social security contributions.
The EU, for its part, is pushing for deeper entry into India’s financial and legal services markets, along with stronger commitments in areas such as labour, environmental standards and intellectual property. India has preferred to keep more room for policy flexibility in these chapters.
7) India’s two warning lights: carbon costs and hidden barriers
Even if tariff lines are reduced, India is wary that the net advantage could be diluted by other EU measures. Two issues stand out: the bloc’s carbon border levy, and the range of non-tariff barriers that raise compliance costs, including long regulatory timelines, strict standards and expensive certification requirements.
(With inputs from Reuters)
India and the European Union appear ready to put a long-running set of negotiations to bed, with both sides expected to unveil a near-finished free trade agreement at the India–EU Summit in New Delhi on Tuesday. The push comes at a time when trade barriers are rising globally, and both partners are seeking clearer market access and more predictable rules.
1) The first hurdle comes after the handshake
Even if leaders announce the agreement this week, it won’t take effect immediately. The deal would still need approval from the European Parliament, a step that can take a year or more and could become politically contentious. Recent moves in Brussels to legally challenge another major trade pact underline how easily parliamentary processes can slow timelines or complicate outcomes.
Notably, some large pieces are being kept outside the core package for now. Investment protection and geographical indications are being negotiated separately, meaning the main FTA is tighter in scope, centred on trade in goods, services and the rulebook that governs them.
2) Why are both sides pushing now
For New Delhi, the trade agreement fits into a broader strategy: building alternative export routes and securing stable partners as protectionism spreads across major economies. If finalised, it would add to a growing list of trade pacts India has pursued in recent years.
For the EU, the logic is partly economic and partly strategic. A deal with India supports supply-chain diversification, helps reduce over-dependence on China, and deepens access to one of the world’s fastest-expanding large economies, currently valued at about $4.2 trillion.
3) What India could gain, and why it matters
Europe already sits near the top of India’s trade relationships, alongside the United States and China. In 2024/25, total trade in goods and services between India and the 27 EU members crossed $190 billion. India’s exports to Europe included roughly $76 billion worth of goods and about $30 billion in services.
While the EU’s average tariff levels on Indian products are relatively modest, several job-heavy sectors still face meaningful duties. Textiles and garments, for instance, are taxed at around 10%, according to Global Trade Research Initiative, a Delhi-based think tank.
A deal could help Indian exporters regain competitiveness after the EU began scaling back benefits under its Generalised System of Preferences in 2023, a shift that hit categories such as apparel, pharmaceuticals and machinery. The timing has also become more urgent for Indian firms because of new cost pressures created by steep US tariffs affecting certain products since late August, pushing businesses to look harder at alternative markets.
India’s ask is not limited to merchandise exports. It is also pushing for smoother access for skilled professionals and improved opportunities for IT and services exports.
4) What Europe wants from India
From the EU’s perspective, India remains a tougher market to sell into than many other large economies, mainly because of higher import duties. EU goods exports to India in 2024/25 were worth about $60.7 billion, and they faced a weighted-average tariff of around 9.3%.
European negotiators see the biggest upside in sectors where duties are high and demand is growing. That includes automobiles and auto components, as well as chemicals and plastics. If tariffs fall meaningfully, EU firms could find larger openings in cars, machinery, aircraft and chemical products, alongside better access in services, government procurement, and investment pathways.
5) The deal-breakers are still the sensitive sectors
To keep the negotiations workable, some politically sensitive items have been excluded entirely from the agreement, agriculture and dairy among them.
Another key friction point is the overall coverage of tariff elimination. The EU has been seeking near-total liberalisation across goods, while India has signalled it is willing to go less far, closer to nine-tenths rather than near-complete removal.
Beyond the headline numbers, certain categories remain politically and economically delicate in India. Automobiles and items such as wine and spirits continue to trigger concerns about domestic industry exposure. India has been weighing gradual reductions, phased schedules or capped import volumes instead of sharp duty cuts, citing risks to local manufacturing.
6) The biggest contest is about services and rules
This agreement is also a rules negotiation, not just a tariff exercise. India is seeking “data-secure” recognition under EU frameworks, easier movement for professionals, and measures that reduce the burden of double social security contributions.
The EU, for its part, is pushing for deeper entry into India’s financial and legal services markets, along with stronger commitments in areas such as labour, environmental standards and intellectual property. India has preferred to keep more room for policy flexibility in these chapters.
7) India’s two warning lights: carbon costs and hidden barriers
Even if tariff lines are reduced, India is wary that the net advantage could be diluted by other EU measures. Two issues stand out: the bloc’s carbon border levy, and the range of non-tariff barriers that raise compliance costs, including long regulatory timelines, strict standards and expensive certification requirements.
(With inputs from Reuters)