But the announcement made on 27 January 2026 holds up under scrutiny. India and the European Union (EU) formally declared the conclusion of negotiations for a comprehensive Free Trade Agreement (FTA). It took 19 calendar years, 15 formal rounds and 2 prolonged pauses to find middle ground. That reflects how carefully both governments weighed domestic defensive interests against the long-term advantages of market integration.
Together, India and the EU account for a combined consumer base of roughly 2 billion people and nearly a quarter of global GDP, with bilateral trade in goods and services already crossing 180 billion euros annually. Once fully ratified, the shifts will be significant: the EU has committed to eliminating or sharply reducing tariffs on more than 99 per cent of Indian goods by value, while India will dismantle tariff walls for roughly 96 to 97 per cent of European imports.
The long and steady road when India and the EU first launched negotiations in 2007, it was then called the Broad-based Trade and Investment Agreement (BTIA). The world operated under very different assumptions where single-source supply chains went unquestioned and corporate strategies prioritised just-in-time inventory costs over industrial resilience. But the process hit a wall and was paused in 2013 due to an automotive standoff, wines and spirits friction, data security and privacy issues and pharmaceutical patents.
The catalyst for change arrived with the 2020 pandemic. Governments and boards realised an obsession with low costs had blinded them to supply chain risks. This altered strategic math. When talks resumed in June 2022, the mandate was broadened beyond customs duties to cover investment security, cross-border services, professional mobility, environmental sustainability and supply chain resilience.
What India gains
India’s most immediate, high-volume wins appear in labour-intensive manufacturing. For decades, these export sectors have struggled against persistent tariff walls entering Europe. Under the finalised terms, industries like textiles, apparel, leather, footwear, marine seafood, gems and jewellery, handicrafts and light engineering will see duties drop to zero. These sectors are anchored outside India’s tier 1 cities like Tiruppur for knitwear, Agra and Ambur for leather and Moradabad for metal handicrafts. By lowering entry costs, the agreement delivers a social dividend alongside its economic returns.
Beyond these traditional industries, India’s heavy manufacturing sectors have scored immediate wins, particularly in steel. The European Union manages its steel market through a safeguard system capping duty-free imports at 18.3 million tonnes annually, with a steep 50 per cent tariff on any volume above that. India secured a dedicated country-specific quota of approximately 1.9 million tonnes. Officials expect that factoring in residual global quota allocations, total annual duty-free access will reach roughly 2.8 million tonnes. This covers more than 80 per cent of India’s recent baseline steel exports to Europe. Significantly, the commerce ministry arranged to frontload these quotas with effect from July 2026, well ahead of the treaty’s full legislative ratification. This is a signal of mutual trust and commitment to the treaty’s commercial spirit.
Carbon challenge
However, this expanded access carries a challenge. The EU’s Carbon Border Adjustment Mechanism (CBAM), an environmental border charge designed to equalise the price of carbon-intensive imports with products made under Europe’s domestic emissions rules. Analysts project the carbon penalty on Indian steel could average roughly 35 per cent of its import value once CBAM is fully operational. The commerce ministry has confirmed no blanket exemption from CBAM was granted within the FTA text. Instead, the EU has committed to considering Indian steel for any flexibility extended to other trading partners in future.
India’s agricultural export sectors also achieved breakthroughs in fisheries. Europe’s rigid sanitary and phytosanitary (SPS) standards have historically blocked many Indian seafood exporters. Under the new agreement, the EU has certified 625 Indian fishery establishments for direct export, opening a major market for Indian shrimp and seafood.
The Real Test
India’s ship-recycling sector also secured a regulatory win. India commands nearly 30 per cent of the global shipbreaking market, centred around Alang in Gujarat. It has become only the second nation after the United States to receive formal EU environmental approval for recycling of European-registered commercial ships. This certification will route high-value maritime decommissioning projects directly to certified green shipyards in Gujarat, upgrading the entire domestic recycling industry.
The recent trade push is genuinely impressive. India has signed nine major FTAs over the last four years and is bargaining with nearly ten more. But the real problem is in utilisation. According to the Global Trade Research Initiative (GTRI), only around 30 per cent of time eligible Indian exporters use the discounted tariffs available under active FTAs. Foreign exporters selling into India, by contrast, use their preferential discounts at a rate of about 70 per cent. This data is echoed by the Economist Intelligence Unit (EIU), which places India’s historical FTA usage rate at roughly a quarter, against an average of 70 to 80 per cent across developed economies. This gap is not a failure of trade policy. It highlights an operational reality. The next step now will be to help domestic businesses to actually use the wins.
