India-EU FTA 2026: Complete Sector Breakdown of the $200B Trade Deal

On January 27, 2026, the European Union and India concluded nearly two decades of intermittent negotiations to finalize what European Commission President Ursula von der Leyen described as the "mother of all deals." This free trade agreement represents far more than a bilateral arrangement between two trading partners—it is a watershed moment in global commerce, creating a unified free trade zone encompassing 25 percent of global GDP, one-third of global trade, and 2 billion people. The agreement marks a decisive pivot in how two of the world's major democratic powers are repositioning themselves amid increasing global economic fragmentation and rising protectionism.

The agreement fundamentally resets the bilateral economic relationship, with bilateral trade between India and the EU standing at $136.5 billion in 2024-25, with an ambitious target to reach $200 billion by 2030. This deal will likely reshape supply chains, create new investment corridors, and fundamentally alter the competitive landscape in sectors ranging from automobiles to pharmaceuticals to technology services.

The Eighteen-Year Negotiation Journey: From Optimism to Breakthrough

In 2007, India and EU began ambitious trade talks, matching India's IT services with Europe's manufacturing. But sticking points—high auto tariffs, wine duties, pharma rules—stalled progress after 15 rounds by 2013.

Nearly a decade later, 2022 changed everything. EU wanted supply chain options beyond China. India sought tech and new markets. Commerce Minister Piyush Goyal and EU's Valdis Dombrovskis relaunched talks on June 17 across three tracks: main FTA, investment rules, and wine protections.

Four years of focused negotiations delivered a balanced deal on January 27, 2026—turning long frustration into a pragmatic foundation for $200 billion bilateral trade by 2030.

Automobiles: India’s Flagship Compromise

• Auto emerged as the most sensitive and high‑value sector in the FTA, handled through phased cuts and quotas rather than full, instant liberalisation.

• India will allow up to 250,000 EU vehicles per year under a special quota, split between internal combustion engine (ICE) vehicles and electric vehicles (EVs).

• For about 160,000 ICE vehicles, applied tariffs will fall from a ceiling near 110% to 10% over five years, with higher rates in the initial years.

• For roughly 90,000 EVs, the transition is slower, with tariffs reduced to 10% only by year ten to protect India’s emerging EV ecosystem.

• Outside the quota, tariffs on fully built fossil‑fuel cars will be reduced in stages to around 35% over a decade, still providing a protective buffer.

• Up to 75,000 high‑value EU cars (above a fixed price threshold) can come in as completely knocked‑down (CKD) kits for assembly in India at a concessional rate (about half the earlier CKD duty).

• Duties on most auto components are reduced to zero, encouraging EU firms to integrate Indian suppliers into their global value chains.

• Compared with the India–UK FTA auto quota (around 37,000 vehicles), the EU’s 250,000‑vehicle quota is more than six times larger, reflecting both the EU market’s scale and its stronger bargaining position.

• In return, Indian manufacturers (such as Tata Motors, Mahindra & Mahindra, and Maruti Suzuki) gain access to an EU import quota of up to about 625,000 vehicles, with EU tariffs on Indian EVs phased down to zero over ten years.

• A built‑in review clause links any future changes in auto quotas and tariffs to parallel discussions on sectors such as steel, giving both sides leverage for subsequent negotiations.

Tariff Liberalisation Across Goods

• Overall, tariffs are eliminated or sharply reduced on more than 96% of EU exports to India and over 90% of India’s exports to the EU.

• EU exporters are estimated to save several billion euros annually in customs duties once the agreement is fully implemented.

• Indian exporters gain improved price competitiveness in the EU because many of their products will now enter either duty‑free or at much lower tariff rates.

• The deal is expected to significantly expand two‑way trade in goods over the next decade, with both sides projecting strong double‑digit growth in exports.

Alcoholic Beverages

• India will cut very high tariffs on European wines and spirits in a phased manner.

• Duties on many premium wines will fall from around 150% to about 20–30% over the transition period.

• Spirits duties will be reduced from peaks near 150% to about 40%, and beer tariffs will also be cut substantially.

• Lower duties are targeted at mid‑ to high‑end imported products; very low‑priced wines remain largely protected to shield India’s domestic wine segment.

• The EU achieves a key market‑access objective in a high‑margin sector, while India maintains a floor of protection for local producers.

Aerospace, Machinery and Industrial Inputs

• Tariffs on aircraft, spacecraft and most aerospace parts imported from the EU will be eliminated, reducing costs for India’s fast‑growing aviation market.

• Duties on a wide range of machinery and capital equipment are either eliminated or reduced, lowering the cost of modernising Indian factories.

• Reduced tariffs on EU industrial inputs (for example, precision machinery and certain intermediate goods) support India’s manufacturing push in sectors such as autos, textiles, chemicals and electronics.

Olive Oil, Vegetable Oils and Processed Foods

• EU tariffs on several food‑related Indian exports and Indian tariffs on selected EU food products are brought down significantly or removed.

• Duties on EU olive oil and some other vegetable oils are cut to zero, making these products more affordable in India.

• India secures duty‑free or improved access for items such as table grapes and certain processed foods, supporting higher‑value farm and agro‑processing exports.

Overall Trade and GDP Impact

• EU exports to India are projected to roughly double over the medium term, reaching well over €100 billion once the FTA is fully in force.

• Indian exports to the EU are also expected to grow strongly, with medium‑term projections placing them in the same broad range as EU exports to India.

• Model‑based estimates suggest a modest but positive impact on EU GDP (around a few tenths of a percentage point) and a larger relative boost for India (close to one percentage point in some scenarios).

• The agreement is expected to support job creation on both sides by stimulating export‑oriented sectors and attracting new investment.

Pharmaceuticals and Intellectual Property

• The IP chapter was one of the toughest areas, but the final outcome preserves India’s space to remain a major supplier of affordable generic medicines.

• Proposals that would have delayed generic entry—such as strong “data exclusivity” and blanket patent term extensions—were not accepted in the form originally sought.

• India retains key features of its patent regime (including safeguards against evergreening), allowing generic manufacturers to launch products once core patents expire.

• Indian companies gain clearer and more predictable access to the EU market for generics, complex generics and biosimilars.

• EU innovators benefit from improved enforcement of existing IP rights and more certainty in the Indian market, while India maintains its public‑health‑oriented flexibilities.

Carbon Border Adjustment Mechanism (CBAM) – High‑Level

• The EU’s CBAM, which applies a carbon price on certain imports (such as steel and cement), will continue to operate alongside the FTA.

• Both sides have agreed to intensify technical cooperation so that Indian exporters—especially small and medium firms—can adapt to EU climate‑related requirements.

Services, Investment and Geographical Indications

• The FTA improves access for EU service providers in areas such as shipping, aviation‑related services and certain business services.

• India gains clearer and more favourable conditions for IT, business process and professional services in the EU, building on its strong services export base.

• Investment protection is being handled in a dedicated agreement, providing more tailored rules for investors from both sides.

• Geographical indications (GIs)—for example, European wines and specialty food names—are negotiated in a separate but linked instrument, recognising the EU’s large GI portfolio and India’s own growing list of protected names.

• Separating these issues from the main goods FTA allowed the core trade deal to move ahead while detailed work on GIs and investment continues on customised tracks.

Agriculture – Kept Outside the Core Deal

• Most primary agriculture is intentionally left out of the main FTA to respect sensitivities on both sides.

• India continues to protect key farm sectors linked to rural livelihoods and food security.

• The EU avoids full exposure of its farmers to new competition in especially sensitive lines.

• Some targeted openings are still provided—for example, better access for Indian fruits, grapes and processed foods, and improved terms for select EU food and beverage products.

• Sanitary and phytosanitary (SPS) provisions focus on transparency and cooperation but largely maintain the EU’s existing safety and quality standards; they do not radically rewrite those rules.

EICBI: Building Lasting EU-India Business Partnerships

The Europe India Centre for Business and Industry (EICBI), accredited by the European Parliament and chaired by Sujit S. Nair, has supported EU-India economic cooperation through practical business platforms. Over 15 years, EICBI organized 29 summits at the British Parliament and 6 EU summits, creating structured dialogue between policymakers and business leaders.

During the FTA's critical final phase, EICBI hosted the EU-India Leaders Conference at the European Parliament on November 5, 2025. This event brought together senior officials and business representatives precisely when negotiators resolved key issues on tariffs, intellectual property, and investment protection, facilitating essential understanding of regulatory frameworks.

EICBI also connected over 90 companies across semiconductors, renewable energy, and education sectors. This work positioned semiconductors as a strategic priority, supporting both sides' efforts to diversify supply chains beyond traditional dependencies.

As the FTA heads toward 2027 implementation, EICBI's established networks and European Parliament accreditation position it to help businesses navigate new market access opportunities. Chairman Sujit S. Nair's advocacy credentials enable effective representation of business interests within EU institutions.

EICBI demonstrates how independent platforms translate trade agreements into practical partnerships. By fostering business-to-business connections and regulatory clarity, the organization supports the FTA's success through relationship-building rather than formal lobbying—essential infrastructure for sustainable economic cooperation.

Conclusion: India-EU FTA - Key Takeaways

The India-EU Free Trade Agreement creates a massive economic partnership covering 25% of global GDP and 2 billion people. Current $136.5 billion bilateral trade targets $200 billion by 2030.

Major Wins:

• 96%+ tariff cuts on EU goods to India; 90%+ on Indian goods to EU

• Zero duties for textiles, chemicals, pharma, machinery

• Phased auto quotas protect Indian industry while opening premium segments

• IT/services get better EU market access

Benefits for Both:

• Lower prices for consumers

• More export jobs in competitive sectors

• EU saves billions in duties

• India accesses $17 trillion EU market

Review clauses ensure flexibility. Implementation starts 2027.

Success depends on businesses turning legal wins into real partnerships—a role organizations like EICBI can support.