Not Everything Is Open: What the India–EU FTA Leaves Out

The India-EU Free Trade Agreement, finalised on January 27, 2026, eliminates tariffs on over 90 percent of traded goods and creates unprecedented market access between two major economies.

Yet the agreement is not universal. Certain sectors remain partially or fully excluded, reflecting both nations' need to protect domestic interests and vulnerable industries.

Understanding what the FTA does not cover is as important as recognising what it does.

These exclusions reveal the real-world complexities of balancing free trade with social, economic, and strategic priorities.

Agriculture Remains Protected on Both Sides

Primary agriculture products remain largely outside the core tariff-cutting provisions of the India-EU Free Trade Agreement signed on January 27, 2026. Both countries decided to keep these sectors outside the main tariff-cutting provisions of the deal.

Both sides have chosen to protect sensitive farm sectors, keeping staple commodities and politically sensitive agricultural categories excluded from full tariff reductions.

This reflects concerns on both sides around farmer livelihoods, food security, and domestic price stability, particularly in sectors dominated by small producers.

India's agriculture sector employs a large portion of the workforce, predominantly small and marginal farmers.

Sudden tariff cuts could lead to import surges that lower farm prices and hurt farmer incomes. The EU similarly protects its farmers in sensitive sectors like beef and poultry production.

While core agriculture remains outside the agreement, some processed and higher-value agri-food products receive tariff benefits. These include processed foods, tea, coffee, spices, table grapes, gherkins, and certain dried vegetables.​

Steel Faces Restricted Market Access and Carbon Constraints

Steel is not fully liberalised under the India–EU Free Trade Agreement and instead receives restricted market access rather than blanket tariff elimination. Public reporting and official briefings indicate that steel trade will be managed through limitations such as quotas and safeguard mechanisms, reflecting the EU’s concerns over import volumes and domestic industrial priorities.

While the broad framework for steel access has been agreed in principle, detailed tariff schedules, quota thresholds, and implementation timelines are expected to be clarified in the final legal text and annexes released by both sides.

A key challenge for Indian steel exporters remains the European Union’s Carbon Border Adjustment Mechanism (CBAM), which continues to apply under the FTA. The agreement does not provide exemptions from CBAM. Instead, both sides have acknowledged the need for technical cooperation to support emissions reporting, carbon accounting, and compliance. India has continued to raise concerns regarding the impact of CBAM on its exports, seeking greater flexibility as discussions on implementation evolve.

Automobiles: Selective Market Opening

Automobiles receive partial tariff cuts rather than complete liberalisation. Lower-priced vehicle segments remain outside the scope of tariff concessions, while higher-value vehicles are subject to phased reductions within defined quotas. This protection covers internal combustion engine vehicles, electric vehicles, and hybrids.

Vehicles with a value below roughly €15,000 are excluded from tariff concessions under the agreement. Passenger cars priced above this level gain limited access through a quota-based system, under which import duties are reduced in stages, starting at about 30–35 percent and declining over time to around 10 percent for eligible volumes.

While the FTA introduces phased tariff reductions for certain categories of finished vehicles, provisions relating to completely knocked-down (CKD) units have not been clearly outlined in publicly available summaries. This indicates that local assembly operations are likely to continue under existing industrial and tariff policies rather than receiving new concessions under the agreement. This protection reflects India's "Make in India" objectives and the importance of the automotive industry to domestic employment.

Investment and Government Procurement: Limited Public Detail

Publicly available summaries of the India–EU Free Trade Agreement focus primarily on trade in goods, while offering limited clarity on the final treatment of investment protection and government procurement. These areas, which are typically sensitive in bilateral negotiations, are not clearly detailed in current public reporting and are expected to be clarified once the full legal text and accompanying chapters are released.

Geographical Indications on a Different Track

Geographical indications—protected names for products like European wines, spirits, and specialty foods—are being addressed through dedicated negotiations linked to the broader trade framework. This allows detailed product-specific treatment outside the standard tariff framework.

Carbon and Climate Rules Unchanged

The EU's Carbon Border Adjustment Mechanism continues to apply under the new FTA without modification.

The mechanism was not suspended or integrated into the trade deal. Instead, both sides agreed to establish technical cooperation to help Indian exporters understand and comply with EU carbon requirements.

Why These Exclusions Matter

Exclusions and limitations are standard in complex trade agreements. They protect sensitive industries and allow both countries to maintain domestic policy space in critical areas.

For India, agriculture and small-scale industry protections reflect rural employment concerns. For the EU, agricultural exclusions preserve support for European farmers.

The India-EU FTA incorporates these exclusions while still eliminating tariffs on over 96 percent of EU exports and 90 percent of Indian exports. This balanced approach allows economic benefits while preserving key domestic interests on both sides. The agreement includes review clauses that enable future adjustments if both parties decide to expand market access in excluded areas.