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 are completely excluded from 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.

India excludes dairy products, cereals, poultry, soymeal, wheat, and certain fresh fruits and vegetables from tariff reductions. The European Union, in turn, excludes beef, chicken meat, rice, sugar, milk powder, and bananas.

This approach reflects priorities on both sides. 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 Quotas and Carbon Challenges

Steel is not fully excluded but receives restricted market access rather than full tariff elimination. India negotiated a duty-free quota of 1.6 million metric tonnes annually for steel exports to the EU—approximately half of India's current annual steel shipments to Europe.

Steel beyond this quota faces standard EU tariffs. This limitation reflects both the EU's concerns about import volumes and its broader industrial policy objectives. The final outcome on steel tariffs was set to be decided by June 30, 2026, before new EU regulations took effect on July 1.

A significant challenge for Indian steel exporters remains the EU's Carbon Border Adjustment Mechanism (CBAM), which applies a carbon price on certain imports. The FTA does not exempt Indian steel from CBAM. Instead, the EU established a technical cooperation group to help Indian producers verify carbon footprints and reduce emissions. India continues to negotiate for greater flexibility on CBAM provisions.

Automobiles: Selective Market Opening

Automobiles receive partial tariff cuts rather than complete liberalisation. Cars priced below €15,000 are completely excluded from the deal. This protection covers internal combustion engine vehicles, electric vehicles, and hybrids.

Only cars priced above €15,000 receive tariff concessions. These vehicles are divided into three categories, each with its own import quota and tariff schedule. Tariffs start at around 30–35 percent and phase down to 10 percent over five years.

Electric vehicles receive even more limited treatment. Tariff reductions on EVs do not begin until year five of the agreement, with tariffs eventually reaching 10 percent only within established quotas.

Completely knocked-down (CKD) units for local assembly are excluded entirely, receiving no tariff benefits. This protection reflects India's "Make in India" objectives and the importance of the automotive industry to domestic employment.

Investment and Government Procurement Handled Separately

Investment protection is not part of the main FTA but handled through a separate dedicated agreement. This allows tailored rules for investor protection between the two countries.

Government procurement is similarly not included in the core FTA commitments. Both sides have kept this sector outside the main tariff package.​

Geographical Indications on a Different Track

Geographical indications—protected names for products like European wines, spirits, and specialty foods—are negotiated in a separate but linked instrument rather than within the main goods FTA. 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.