In this edition of the Indian Radius, we examine the 16th India-EU summit as New Delhi and Brussels moved to anchor trade, technology, and security cooperation within a single strategic framework.
There are two major developments: the conclusion of the Free Trade Agreement negotiations and the launch of the Security and Defence Partnership.
We’ll first take a look at key details of the trade deal.
The EU will eliminate tariffs on over 90% of tariff lines and 91% by value, and India will eliminate tariffs on 86% of tariff lines and 93% by value.
Bilateral trade in goods between the two partners equalled €120 billion in 2024. EU goods imports from India stood at €71 billion in 2024, while EU goods exports reached nearly €49 billion that year.
What is included?
The biggest win for India comes in the textiles & apparel sector with immediate zero-duty access to the EU. This is a massive boost for the sector, which has not only been losing ground to Bangladesh and Vietnam but also reeling from the impact of US tariffs. Tariffs have also been slashed for leather, footwear, gems and jewellery, and marine products.
For the EU, the deal is a big win for the automotive industry and the food and alcohol producers. EU companies also gain privileged access to India’s financial services and maritime transport sectors, markets that were previously hard to crack. The most contentious point, related to cars, has been resolved with a phased approach to protect Indian manufacturers while opening the door for German and French automakers.
Automotive Sector (Special Clause): The duty cut (110% to 10%) applies only to Completely Built Units or finished imported cars.
CKD Exclusion: Cars imported as “Completely Knocked Down” kits (for local assembly) are excluded from the benefit to protect domestic factories.
EV Pause: Electric Vehicles are explicitly excluded from duty cuts for the first 5 years to allow India’s EV ecosystem to mature.
Source: European Commission Fact Sheet
What is excluded?
India’s Exclusions:
Dairy Sector: European milk, cheese, butter, and yoghurt are completely excluded. There will be no duty cuts, ensuring that subsidised European dairy does not undercut India’s cooperative model.
Other excluded agricultural products include wheat, rice, and poultry.
EU’s Exclusions:
The EU protected its own farmers and cultural sectors from Indian competition, keeping rice, sugar, and beef off the table. Indian exporters will not get duty-free access for these items, as they are heavily protected in Europe under the Common Agricultural Policy (CAP).
To protect European culture and media, the EU excluded the audio-visual sector from the services agreement.
The Partial Exclusions or Quotas:
Some sectors weren’t fully excluded but were heavily restricted via Tariff Rate Quotas (TRQs). This means duty-free (or low-duty) access is allowed only for a specific quantity; anything above that pays full tax.
Automobiles: EU cars priced below €15,000 are effectively excluded to protect mass-market players in India.
Luxury Cars: Only a quota of 250,000 vehicles gets the lower 10% duty in India.
Steel: The EU did not give India blanket duty-free access for steel. Instead, a duty-free quota (approx 1.6 million tonnes) was set to prevent Indian steel from flooding the European market.
Gold/Jewellery: While generally open, specific strict “Rules of Origin” apply to ensure gold isn’t just imported from Dubai, lightly processed, and shipped duty-free to Europe.
Excluded Policy Areas
Data Flows: The deal does not include a binding agreement on cross-border data flows. The EU insisted on its GDPR (General Data Protection Regulation) standards, while India has its own DPDP (Digital Personal Data Protection) Act. This issue has been moved to a separate “Data Adequacy” track.
Carbon Border Tax (CBAM) Waiver: India pushed for an exemption from the EU’s carbon border tax, but the bloc maintained that such carve-outs are not permissible under the current regulatory framework. It reaffirmed that CBAM would be applied on a non-discriminatory basis in line with most-favoured-nation (MFN) principles. Indian steel and aluminium producers will remain subject to the carbon levy, with an agreement on technical assistance to facilitate emissions accounting and compliance.
Possible timeline for Implementation:
Jan 2026: Negotiations Concluded.
Feb–Aug 2026: Legal revision and translation into EU languages.
Late 2026: Ratification by the European Parliament.
Early 2027: The agreement officially enters into force.
Important Clarifications to note:
Two major agreements are often confused with the FTA but are legally separate and on different tracks:
Investment Protection Agreement (IPA): This replaces the old Bilateral Investment Treaties. It is not yet concluded and is still being negotiated to set up a new “Investment Court System.”
Geographical Indications (GIs): The specific pact protecting names like Champagne, Feta, Darjeeling Tea, and Basmati is currently in the final stages of a separate negotiation and was not part of yesterday’s signed text.
On Defence & Security
A new EU-India Security and Defence Partnership was finalised during the summit. The biggest technical win for India is the opening of doors to PESCO (Permanent Structured Cooperation) projects. The EU will now likely allow India to join specific PESCO projects as a “third-party state” (similar to the US, Canada, and Norway).
The partnership outlines a roadmap for Indian manufacturers to supply non-lethal components and eventually ammunition to European defence stockpiles, which have been depleted over the last few years. As part of the broader trade deal, tariffs on aircraft and spacecraft parts imported from the EU have been slashed to 0%, with the aim of boosting India’s aerospace manufacturing ecosystem.
Leaders also launched negotiations on a Security of Information Agreement to enable the exchange of classified information, which is a precondition for deeper technology and operational cooperation with EU institutions and member states.
Integration of Indian defence manufacturing into European supply chains, including under the EU’s “ReArm” drive, is flagged as a major opportunity for exports of ammunition and explosives.
High‑volume, cost‑efficient production of standardised munitions is a natural entry point into EU supply chains for Indian companies. A planned India–EU Defence Industry Forum will link companies on both sides to identify concrete projects in manufacturing, innovation and technology, with governments acting as facilitators.
There is no doubt that geopolitical anxieties have acted as a catalyst for renewed engagement, pushing both sides toward a more realistic assessment of their strategic interests. The talks have ultimately culminated in a mature and pragmatic deal, with a conscious effort to avoid any destabilising commitments. Most importantly, the process reflects a growing mutual recognition of each other’s constraints and priorities, laying the groundwork for a more consequential India-EU relationship ahead.
Further Reading
The EU recently concluded an FTA with Mercosur. To understand how both the FTAs compare, read this blog post.
India and Germany recently made headway in strengthening defence and security cooperation. Read this opinion piece to explore the successes and challenges in their partnership.
Thank you for reading this edition of The Indian Radius.
There never was an FTA finalised between India and the EU. Discussions yes, but no actual mutually-agreed text for an FTA.
Trade deals with India are always fraught over three main issues:-
The insistence in India for ‘home first’ - companies operating in India have to have primarily Indian ownership
Protectionism - linked to 1. Many industries in India are still effectively single company monopolies and competition is often prevented by the need for Government licensing
And as if those weren’t obstacles enough, we have the usual killer which is enhanced visa allocations - yes, you can have a deal provided you allow in hundreds of thousands of Indian migrants, not too many questions asked
India is not a profitable market for non-Indian companies at present. It will be in the future, but not right now - too many obstacles, too little immediate profit.
So, any FTA with India is a future play. Nothing wrong with that, but most countries will be looking to boost their immediate options in 2021/22.