India‑EU FTA: MoC Weighing Potential Impact on Exports



The India‑European Union Free Trade Agreement (FTA) has emerged as one of the most consequential trade pacts of the year, with officials and industry stakeholders around the world carefully studying its implications for export‑oriented economies. As India and the EU conclude decades of negotiation on this comprehensive trade deal, the Indian Ministry of Commerce (MoC) is rigorously evaluating how the pact will affect export flows, competitiveness, domestic industries and global positioning.

The Ministry’s deliberations come at a critical moment. Following nearly 20 years of discussion and negotiation, both sides have agreed on a framework that will see tariffs slashed on the vast majority of traded goods and services, ushering in a new era of economic cooperation between two major economic players.

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A Historic Deal With Far‑Reaching Scope

On January 27, 2026, India and the European Union formally concluded a landmark Free Trade Agreement, hailed by leaders as transformational for bilateral trade relations. The pact will extend preferential market access on more than 99% of Indian exports by trade value, with reciprocal benefits on roughly 97% of EU exports to India.

This agreement positions the EU as one of India’s most significant trading partners. In fiscal year 2024–25, bilateral goods trade was valued at around $136.5 billion, with Indian exports to the EU amounting to approximately $75.8 billion. With tariff barriers reduced sharply, this FTA could substantially boost India’s export volumes across multiple sectors.

The MoC’s review focuses on several key questions: Which export sectors will benefit most directly? How will tariff elimination affect competitiveness? What non‑tariff barriers might still dampen trade? Answering these will be crucial for crafting post‑FTA policy and support measures.

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Export Winners: Textiles, Engineering and Beyond

Early industry assessments indicate that a wide range of Indian export sectors are set to gain competitive advantage in the European market:

Textiles and Apparel

The textile sector — one of India’s largest employers and export earners — stands to gain significantly from the elimination of duties that previously ranged up to 12% on products entering the EU. Analysts expect Indian textile and apparel exports to grow rapidly, potentially increasing market share in a bloc traditionally dominated by countries such as Bangladesh and Turkey.

The All India Textile Exporters body has signaled optimism about rising orders and strengthened export pipelines, particularly as Indian goods become tariff‑free and more price‑competitive in the EU.

Engineering and Capital Goods

The engineering sector — encompassing industrial machinery, automotive components, and metal products — is another major beneficiary. Experts estimate that FTA‑enabled tariff cuts could lift engineering exports to $25 billion in a short period as Indian products become more accessible and cost‑competitive in European markets.

This growth would support India’s broader export targets and buttress sectors that are deeply integrated into global value chains.

Leather, Gems and Jewellery, Marine Products

Traditional labour‑intensive segments such as leather goods, gems and jewellery, and marine food products also anticipate substantial export growth. By eliminating or progressively phasing out duties on these lines, the FTA lowers cost barriers and unlocks fresh opportunities across multiple EU member states.

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Trade Diversification and Strategic Realignment

India’s commerce leadership has underscored the strategic timing of this FTA. With protectionist trade measures elsewhere — notably high U.S. tariffs on Indian textiles and leather — the EU deal presents an avenue for redirecting and diversifying export destinations.

The MoC is considering how Indian exporters can pivot to the EU market more aggressively to mitigate risks posed by adverse tariff environments in other major markets. For sectors heavily reliant on external demand, this could mean expanded market penetration and increased foreign exchange earnings.

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Managing Non‑Tariff and Compliance Challenges

While tariff reductions are a central feature, the Ministry also acknowledges that non‑tariff barriers — such as strict EU standards on food safety, quality certification, carbon footprint disclosure, and regulatory compliance — must be addressed to fully capitalize on tariff benefits.

For instance, Indian spice exporters have welcomed tariff elimination but cautioned that border rejections and regulatory issues must be streamlined to achieve smooth market entry and stable trade growth.

To this end, the MoC is working closely with industry bodies and EU counterparts to reduce technical barriers, improve export documentation systems, and enhance conformity with EU market standards.

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Expert Insights and Policy Implications

Trade analysts argue that the FTA could eventually reshape global trade flows, particularly if Indian exporters leverage the deal to strengthen their presence in the EU while diversifying markets in Africa, Latin America and Southeast Asia.

However, some experts caution that domestic industries may face increased competition from EU imports in sectors such as automobiles and luxury goods, where tariff cuts are also significant. This underscores the need for calibrated policy responses to support domestic competitiveness.

Meanwhile, the MoC’s ongoing impact assessments are expected to inform export promotion strategies, infrastructure investments, and capacity‑building initiatives that help Indian firms scale output and meet international quality benchmarks.

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Conclusion: A New Chapter for Indian Exports

As the India‑EU FTA moves toward implementation, the Commerce Ministry’s careful assessment of export impacts reflects both the opportunities and complexities inherent in large‑scale trade liberalization. By identifying sectoral strengths, addressing non‑tariff challenges, and enabling strategic trade diversification, India aims to unlock the full potential of this historic pact.

If effectively harnessed, the FTA could not only expand India’s export footprint in Europe but also elevate the country’s role in global commerce, supporting jobs, investment, and sustainable economic growth in the years ahead.