India-EU free trade agreement: India and the European Union (EU) reached a long-awaited free trade agreement on Tuesday, January 27, as both parties aim to safeguard their interests amid changing relations with the US.
Following nearly 20 years of intermittent discussions, this agreement will enable India to expand its extensive and previously restricted market to engage in free trade with the 27-member EU, its largest trading partner.
Indian Prime Minister Narendra Modi indicated that a major agreement was finalized between the European Union and India yesterday, January 26.
Around the globe, people are referring to this as the “mother of all deals”. According to Modi, this agreement will create significant opportunities for India’s 1.4 billion citizens and the millions residing in Europe.
Modi and Ursula von der Leyen, the President of the European Commission, announced the particulars of the agreement during an India–EU summit in New Delhi today.
In the fiscal year ending March 2025, trade between India and the EU reached $136.5 billion.
The official signing of the India-EU agreement is expected to occur following a legal review that is projected to take five to six months, as stated by an Indian government official familiar with the situation, according to media reports.
Discussions started in 2007, stalled in 2013 due to disagreements over tariffs, standards, and market entry, and were reignited in 2022 as geopolitical pressures compelled both parties to reevaluate their supply chains and strategic alliances.
“If executed well, this deal is not just about trade—it’s about repositioning India deeper into global manufacturing and services value chains. The agreement aims to slash tariffs across most goods, ease regulatory friction, and open doors in services and investment,” said Tushar Badjate, Director of Badjate Stock & Shares Pvt Ltd.
India-EU free trade agreement
As per the India-EU free trade agreement, the EU will cut tariffs on 99.5% goods traded over seven years, with tariffs to be cut to zero on Indian marine goods, leather and textile products, chemicals, rubber, base metals and gems and jewellery, India’s trade ministry said in a statement.
Meanwhile, this FTA would also open up India’s vast and highly guarded market, with New Delhi slashing tariffs on cars to 10% over five years from as high as 110%, according to an EU statement. India is also slashing tariffs on alcoholic beverages like wines to 75% immediately from 150%, which would be lowered to 20% gradually. Tariffs on spirits will be lowered to 40%, the EU said.
India-EU free trade agreement: Sectoral winners
According to Badjate, this is a strategic opportunity, not a free lunch. Winners will be those who adapt fast—because in global trade, hesitation is the most expensive tariff of all.
Textiles, apparel, leather, pharmaceuticals, engineering goods, and IT services—sectors where lower EU tariffs and smoother compliance can translate directly into higher export competitiveness would be the big Indian beneficiaries, said the expert.
For Europe, Tushar believes that automobiles, luxury goods, machinery, chemicals, and clean-tech stand to gain meaningful access to one of the world’s fastest-growing consumer markets.
But every deal has a flip side, opined Badjate. “Indian auto, dairy, and select MSME segments may feel the heat from cheaper European imports, while carbon norms and non-tariff barriers from the EU could quietly cap upside for exporters,” added Tushar.
Similarly, Munjal Almoula, Managing Partner – Tax & Regulatory Advisory, BDO India, said that textiles, gems & jewellery, leather, pharma, and high-tech engineering will surge, and is expected to double to $136B in bilateral trade by 2032, amid the ongoing US tariff disruptions, while easing professional mobility and data-secure status for India’s services edge.
India-EU trade deal: Stocks to watch
Market analysts also point out stocks to monitor that will gain from the India-EU free trade agreement and those that may respond negatively.
Auto ancillaries – Motherson, Bharat Forge, Sona BLW
Opportunities for exports to the EU and potential tariff advantages may enhance volumes and profit margins, according to market analysts.
Textiles – Welspun Living, Gokaldas Exports
Improved access to EU markets might boost demand and enhance competitiveness, according to market analysts.
Watches/Cheaper imports – Timex, Ethos, KDDL
Reduced duties on watch imports could facilitate volume growth and bolster margins, according to market analysts.
Increased competition for JLR in European markets may impact pricing strength and profit margins, as per market analysts.
Inexpensive wine imports from the EU might exert pressure on pricing and market share, according to market analysts.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
