India and the European Union have entered into a Free Trade Agreement that is expected to reshape trade flows, sector dynamics and company level opportunities over the coming years. This blog explains the real-world impact of the India EU Free Trade Agreement on Indian sectors, industries and listed companies.
When the India EU Free Trade Agreement will start and when impact will be visible
The agreement will be implemented from financial year 2027
Initial benefits are expected to begin from FY 2027
A larger and more visible impact is expected from FY 2028
This timeline is important for investors and businesses tracking earnings impact and export growth.
Defence industry and aerospace manufacturing
India and the European Union have signed their first Security and Defence Partnership framework alongside the broader trade engagement. The agreement covers maritime security, defence industry and technology, cyber threats, space security and counter terrorism.
Key developments include
Annual institutionalised India EU Security and Defence Dialogue
Negotiations on a Security of Information Agreement
Exploration of India participation in European defence programmes
Import tariffs on aircraft and spacecraft for European companies reduced from 11% to 0%
Creation of an India EU Defence Industry Forum to promote co-development, co-production and industrial collaborations.
Deeper cooperation on counter-terror financing, misuse of emerging technologies, online radicalisation and regional security.
Our View
The European Union plans to raise defence spending from about 1.9% of gross domestic product to about 3.5%
Europe is looking to reduce reliance on United States and Chinese suppliers
Indian defence companies are well positioned as cost competitive and reliable manufacturing and co-development partners
Opportunity areas include aircraft programmes, aero structures, engines, missiles, electronics, radars, submarines and naval platforms
Existing linkages already exist with companies such as Hindustan Aeronautics, Bharat Electronics, Bharat Dynamics, Larsen and Toubro, Tata Advanced Systems, Mahindra Defence, Bharat Forge and Mazagon Dock Shipbuilders
The agreement supports a gradual shift from licensed production to co-development, engine manufacturing, platform integration and long-term participation in European defence supply chains.
Textile, footwear, marine products and gems and jewellery
The trade deal significantly benefits labour-intensive sectors through zero tariff access to the European Union market.
Textiles and apparels
0 tariff on textile exports to European Union countries
Earlier tariff was 12%
India has about 2% share in European apparel imports (~USD197bn) and 5% share in home textiles (~USD21bn)
Stronger competitiveness against China and Bangladesh
Key beneficiaries
KPR Mill
Gokaldas Exports
Pearl Global
Indo Count Industries
Footwear
India has about 3% share in European footwear imports
Tariff reduced to 0% from 17%
Creates opportunities to compete with Vietnam and China
Indian footwear companies might install global standard capacities to explore export opportunities
Key beneficiaries
Relaxo Footwear
Campus Activewear
Bata India
Marine products
Indian marine exports to European Union countries are about USD1bn
Tariff reduced to 0% from about 26%
European Union has approved 102 new fishery establishments
Key beneficiaries
Gems and jewellery
Exports to European Union countries are around USD 0.3bn
Tariff reduced to 0% from 4%
Key beneficiary
Pharmaceuticals and medical equipment
Key changes under the agreement
Tariff on pharmaceutical imports from the European Union reduced to 0% from 11%
Pharmaceutical imports from Europe stood at 1.1bn euros during 2024
Tariff on 90% of medical and surgical equipment reduced from 27.5% to 0%
Our view
Benefits multinational pharmaceutical companies importing high value drugs especially cancer drugs and human insulin
Key beneficiaries include AstraZeneca, Sanofi and Abbott
Information technology services
The agreement improves mobility and service access for Indian technology professionals.
Key developments include
Proposed European Legal Gateway Office in India
Improved cross border delivery of services
Progress on social security agreements with remaining European Union member states
Stronger collaboration in artificial intelligence, semiconductors and digital technologies
Research team view
Positive for Indian information technology services
Reduces dependence on the United States market
Improves take home pay for employees and reduces company costs
Supports higher value work and deeper client engagement
Companies expected to benefit include
Mastek
FSL
Coforge
Newgen Software
Chemical sector
Trade impact under the agreement
Export tariffs to Europe reduced to 0% from an average of 12.8%
Import tariffs from Europe reduced to 0% from about 22%
India currently exports 3 to 3.5bn euros of chemicals to Europe
Our View
Positive for multinational chemical companies operating in India
Supports higher imports from parent entities and market expansion
Indian specialty chemical exporters gain competitiveness
Likely beneficiaries include
SRF
Vinati Organics
Navin Fluorine
Gujarat Fluorochemicals
Premium passenger vehicle segment
Key points from the agreement
Easier introduction of premium and luxury European vehicles in India
No immediate price cuts expected
Luxury vehicle sales in India were about 51,000-52,000 units in 2025
Most European manufacturers sell vehicles as completely knocked down units and are subject to much lower taxation
Research team view
Long term structural benefit rather than short term price impact
Consumers gain wider choice and access to new technologies
Price benefits may emerge over time with deeper localisation
For now, the real gain is variety and sophistication and not affordability
Other key developments highlighted by the agreement
Strong focus on sustainability and clean technology. Cooperation on green hydrogen and solar energy. Support for resilient supply chains under the India EU Strategic Agenda towards 2030.
Import duties on aluminium, copper, zinc, nickel, lead and tin reduced to 0. Negotiations for higher steel export quotas. Likely beneficiaries include Hindalco Industries, Vedanta Aluminium and NALCO
0 duty access to the European Union electronics market valued at 750bn dollars. Duty elimination up to 14% on electronics and components. Positive for LED televisions, lighting and home appliances. Supports growth of contract manufacturers such as Dixon Technologies
The agreement opens opportunities for investment in European digital infrastructure. Mentioned by the chairman of Bharti Airtel
Frequently asked questions
What is FTA?
A Free Trade Agreement is a pact between two or more regions that reduces or removes trade barriers such as import tariffs, making it easier for goods and services to move across borders.
When will the India EU Free Trade Agreement start?
The agreement will be implemented from FY 2027 after regulatory and parliamentary approvals.
When will investors see the impact of the India EU Free Trade Agreement?
Initial benefits are expected from FY2027, while a larger impact is likely from FY2028.
Which Indian sectors benefit the most from the agreement?
Defence manufacturing, textiles, footwear, marine products, gems and jewellery, information technology services, chemicals, pharmaceuticals and electronics manufacturing.
Will car prices fall immediately due to the agreement?
According to the research team, immediate price cuts are unlikely. The key benefit in the near term is wider model availability and access to new technologies.