India-EU Trade Deal: Summary, Tariffs, Beneficiaries, Impact, US Reaction

The India-EU trade deal is a historic trade deal announced jointly by India and the European Union on 27th January 2026. This trade deal, or free trade agreement (FTA) between the EU and India, is referred to as the “Mother of All Deals”, as it aims to tap unexplored potential in trade and commerce between these countries. 

Features of the India-EU trade deal, sectors benefiting in India, and the reaction from the  US are covered in this article.

Key Takeaways

• India and the European Union announced the free trade agreement on 27th January 2026.
• This agreement aims to ease tariffs on ~95% of products traded between these two countries and also plans a phased reduction in tariffs to safeguard domestic sectors such as dairy or poultry.
• Labour-intensive industries will gain significant benefits from this free trade agreement.
• The free trade agreement is yet to receive approval from the respective governments.

What is the India-EU Trade Deal?

India and the European Union (EU) have negotiated tariff relaxations on various products and services. This agreement aims to increase the ease of business for enterprises and corporations in both countries.

The agreement covers:

• Tariff reductions on various products
• Ways to ease market access for service sectors
• Digital trade and intellectual property provisions
• Customs and regulatory cooperation

India-EU Trade Deal Highlights

• Elimination of tariffs on goods exported between these countries.
• Quotas and phased tariff reductions for high-value products such as automobiles.
• Simplified customs procedures, stronger intellectual property protections, and improved regulatory predictability.
• Easing the movement of employees in Indian corporations with EU presence.

Tariff Reductions of the India-EU Trade Deal

India exports to the EU: The EU aims to eliminate  duties on more than 90% of tariff lines, which covers almost 96% in export value terms. 

• Textiles, leather, footwear, tea, coffee, spices and other goods produced under labour-intensive industries will benefit from immediate duty elimination.
• Tariffs on processed food items, marine products and ammunition will reduce to zero over 3 to 5 years.
• Poultry products, vegetables, steel and other items will have preferential access through tariff reduction.

EU exports to India: India also aims to eliminate duty for 86% of tariff lines, which covers ~93% of export value from the EU.

• Industrial goods used in manufacturing processes, like machinery, electrical equipment, and chemicals, will attract no tariffs.
• Import duty on automobiles will reduce sharply from 110% to 10% over the next 5 to 10 years. 
• Phase-wise tariff reductions are planned for wine and other alcoholic beverages, making these products competitive in the Indian market.

Both countries will provide no tariff relaxation on sensitive agricultural products, to safeguard domestic producers’ interests. 

India-EU FTA: What gets Cheaper?

A tentative list of products that will get cheaper due to FTA in both countries is as follows:

Sector-Wise Impact of the India-EU Trade Deal

• Textiles, leather, footwear, sports goods and other labour-intensive industries will gain competitiveness in the EU market; this would generate local employment and increase margins for these industries. 
• Gems and jewellery products will become cheaper due to tariff elimination in the EU markets. This will provide a stronger foothold in high-value export segments.
• Chemical & pharma industries will gain from increased exports and strengthen the Indian MSMEs when tariffs are removed up to 12.8%.
• Indian handcrafted furniture is also supported in this agreement by lowering tariffs up to 10.5%; this would improve India's role in the furniture supply chain.
• Plastic and rubber industries will gain access to EU markets, which would increase their revenue, margins and local employment.
• Preferential market access will be given to agricultural products like tea, coffee, fresh fruits and vegetables to make their products competitive in the EU. This will elevate global recognition of Indian agricultural products along with farmers' realised income.

Benefits of the India-EU Trade Deal

Indian exporters will gain preferential access to the EU market, increasing their customer base, revenues and margins. With over 95% of Indian exports facing nil or reduced tariffs over the next 5 years, many labour-intensive industries can prove their competitiveness in European markets.

Indian consumers will benefit from lower prices for imported goods, including machinery, vehicles, and other consumer products, as a result of tariff elimination. Phased reductions in tariffs on automobiles, processed foods and beverages are likely to improve product affordability.

Manufacturers in India can avail high-value inputs at a concessional rate from the EU markets for their production processes, improving operational efficiency and margins.

The India-EU deal also specifies visa provision for Indian IT and Corporate professional, easing their mobility and stay across the EU.

Additionally, this agreement will help countries and their business actors diversify trade amid rising geopolitical tensions and tariff pressures from other developed countries. With the ‘China+1” approach, both nations can support their supply chain without any interventions. This will directly uplift the GDP of each country and create millions of jobs.

Challenges & Implementation Timeline

The negotiations on this agreement were primarily discussed on 27th Jan 2026. This agreement will require approval from the EU and the Indian government for its implementation. A legal review shall be completed before signing the agreement; hence, complete rollout is expected in the year 2027 after ratifications.

Challenges appear for enterprises already facing strong domestic competition, such as automobiles and beverages. These enterprises may face greater competition due to lower prices in other countries.

Carbon-emission related taxes in the EU could raise the cost for Indian steel and aluminium exports, making them less attractive in EU markets. EU's deforestation guidelines may require increased compliance from agricultural and wood product exporters.

Strict labour and environmental standards in the EU may require Indian enterprises to upgrade their manufacturing process to meet set quality standards; this may increase operational costs for Indian enterprises. 

Food safety rules and various technical standards may limit dairy and poultry exports to the EU despite tariff reductions.

India-EU Trade Deal: Other Countries’ Reaction

The India-EU deal intersects with many other trade deals, especially with the United States. U.S. trade representatives have said that India will benefit significantly from the India-EU trade deal due to the low production cost and wider access to the European markets. As the US prioritises domestic production over the import of goods, they have to introduce tariffs as a fee for other countries to access the US market. Accordingly, countries exporting to the US are finding other countries to sell their goods and services.