MOFSL sees defence, metals, autos to benefit from India-EU FTA, may reshape global trade
Motilal Oswal sees significant benefits for Indian sectors like IT, metals, and capital goods. The agreement covers 97% of tariff lines, promising gains for Indian exporters.
- Jan 29, 2026,
- Updated Jan 29, 2026 1:52 PM IST
India and the European Union have announced the culmination of a years-long effort with the finalisation of a wide-ranging free trade agreement, described as the 'mother of all deals'. The agreement opens markets for both economies beginning in 2027 after ratification and legal processes, and is expected to reshape economic relations and broader geopolitical dynamics. Motilal Oswal Financial Services highlighted the deal’s significance, noting India’s growing strategic importance and the potential for greater cooperation between the parties.
The combined economic weight of India and the EU is substantial, encompassing nearly 2 billion people and about 25% of global GDP and over 30% of global trade. In FY25, goods trade between India and the EU is estimated at $137 billion, while services trade in 2024 stands at around $83 billion. Motilal Oswal’s analysts suggest this agreement will contribute to easing current geopolitical tensions and foster more balanced dialogue.
India currently maintains a trade surplus with the EU, with Europe accounting for 22% of India’s exports and 13% of its imports in FY25. This surplus positions India to accrue net benefits from the FTA. Goods trade between the two regions has been stagnant since 2023, but the agreement is expected to catalyse a significant increase once implemented.
The agreement offers India preferential access across 97% of tariff lines and 99.5% of trade value, with 70% of tariff lines and 91% of trade value benefiting immediately after ratification. The EU will receive preferential access for 92% of its tariff lines, covering 97.5% of export value, with about half of these advantages taking effect straightaway. India also secures predictable access to 144 EU service sub-sectors, expected to benefit labour- and skill-intensive industries.
Motilal Oswal identifies a degree of complementarity between the economies. Many EU exports to India are high-value products, facing limited competition from domestic Indian firms. Indian exporters in sectors such as capital goods, auto OEMs, metals, and IT services are anticipated to gain a competitive edge in the European market following the FTA’s implementation.
India’s share in EU imports is as low as 3-4 per cent. Hence, there is scope to double it, specifically in apparel, leather and footwear sectors, subject to changes like focusing more on man-made fibre vs. cotton, correction of the inverted duty structure, reduce internal policy disadvantages, said JM Financial in its report.
"With the deal, India’s competitiveness improves vs. countries not having an FTA with the EU, including China. Electronics export is one such area where India gains advantage vis-à-vis other competitors like China and Indonesia. Vietnam will be at par because of its FTA with the EU," it added.
Domestic-focused Indian sectors could encounter increased competition from EU-origin products, though Motilal Oswal suggests the affected segments remain limited due to the nature of high-value imports, such as luxury vehicles and premium beverages. Indian service exporters will benefit from ongoing labour cost advantages and enhanced market access. The agreement also emphasises improved labour mobility, potentially facilitating the movement of professionals between the two regions.
Motilal Oswal sees several sectors as primary beneficiaries including IT Services – more stable EU demand access and diversification beyond the US; bigger advantage for ER&D companies- Metals – reduced or no tariffs for India’s steel exports; Capital Goods – preferential EU access from 22% tariff to nil, preferential imports lower input costs- Defence – cheaper aircraft from EU, lowers US dependence- Auto OEMs – better EU competitiveness- Smaller sectors like agriculture, textiles, agro-chemicals, leather, gems & jewellery, chemicals also stand to gain.
Key stock beneficiaries include Jindal Stainless, SAIL, JSW Steel, LTTS, KPIT Tech, Tata Tech, Tata Elxsi , PI Industries, Godrej Agrovet, UPL, Coromandel International, auto OEMs, capital goods and defence names said the brokerage report.
India and the European Union have announced the culmination of a years-long effort with the finalisation of a wide-ranging free trade agreement, described as the 'mother of all deals'. The agreement opens markets for both economies beginning in 2027 after ratification and legal processes, and is expected to reshape economic relations and broader geopolitical dynamics. Motilal Oswal Financial Services highlighted the deal’s significance, noting India’s growing strategic importance and the potential for greater cooperation between the parties.
The combined economic weight of India and the EU is substantial, encompassing nearly 2 billion people and about 25% of global GDP and over 30% of global trade. In FY25, goods trade between India and the EU is estimated at $137 billion, while services trade in 2024 stands at around $83 billion. Motilal Oswal’s analysts suggest this agreement will contribute to easing current geopolitical tensions and foster more balanced dialogue.
India currently maintains a trade surplus with the EU, with Europe accounting for 22% of India’s exports and 13% of its imports in FY25. This surplus positions India to accrue net benefits from the FTA. Goods trade between the two regions has been stagnant since 2023, but the agreement is expected to catalyse a significant increase once implemented.
The agreement offers India preferential access across 97% of tariff lines and 99.5% of trade value, with 70% of tariff lines and 91% of trade value benefiting immediately after ratification. The EU will receive preferential access for 92% of its tariff lines, covering 97.5% of export value, with about half of these advantages taking effect straightaway. India also secures predictable access to 144 EU service sub-sectors, expected to benefit labour- and skill-intensive industries.
Motilal Oswal identifies a degree of complementarity between the economies. Many EU exports to India are high-value products, facing limited competition from domestic Indian firms. Indian exporters in sectors such as capital goods, auto OEMs, metals, and IT services are anticipated to gain a competitive edge in the European market following the FTA’s implementation.
India’s share in EU imports is as low as 3-4 per cent. Hence, there is scope to double it, specifically in apparel, leather and footwear sectors, subject to changes like focusing more on man-made fibre vs. cotton, correction of the inverted duty structure, reduce internal policy disadvantages, said JM Financial in its report.
"With the deal, India’s competitiveness improves vs. countries not having an FTA with the EU, including China. Electronics export is one such area where India gains advantage vis-à-vis other competitors like China and Indonesia. Vietnam will be at par because of its FTA with the EU," it added.
Domestic-focused Indian sectors could encounter increased competition from EU-origin products, though Motilal Oswal suggests the affected segments remain limited due to the nature of high-value imports, such as luxury vehicles and premium beverages. Indian service exporters will benefit from ongoing labour cost advantages and enhanced market access. The agreement also emphasises improved labour mobility, potentially facilitating the movement of professionals between the two regions.
Motilal Oswal sees several sectors as primary beneficiaries including IT Services – more stable EU demand access and diversification beyond the US; bigger advantage for ER&D companies- Metals – reduced or no tariffs for India’s steel exports; Capital Goods – preferential EU access from 22% tariff to nil, preferential imports lower input costs- Defence – cheaper aircraft from EU, lowers US dependence- Auto OEMs – better EU competitiveness- Smaller sectors like agriculture, textiles, agro-chemicals, leather, gems & jewellery, chemicals also stand to gain.
Key stock beneficiaries include Jindal Stainless, SAIL, JSW Steel, LTTS, KPIT Tech, Tata Tech, Tata Elxsi , PI Industries, Godrej Agrovet, UPL, Coromandel International, auto OEMs, capital goods and defence names said the brokerage report.