Trade Essays

India-EU FTA negotiations launched in 2007, stalled in 2013, and were relaunched with renewed political momentum in June 2022. As of 2026, most technical chapters are complete with remaining contentious areas — IP, government procurement, and sustainable development enforcement — under intensive diplomatic engagement.

What India-EU FTA will deliver: Tariff elimination on 90%+ of lines over 7-10 years. Day-1 eliminations expected for pharmaceuticals (currently 0-6.5%), engineering goods (0-7.5%), chemicals (0-6.5%), and phased elimination for textiles and garments (currently 12%). For services, India seeks Mode 4 commitments (simplified EU work permits for Indian IT professionals); the EU seeks Mode 3 liberalisation of financial and professional services in India.

Rules of origin will be critical. Indian manufacturers sourcing inputs from China must ensure 35-40% India value addition to qualify for FTA preferences. Integrated manufacturers with end-to-end India production are best positioned for Day-1 benefits.

Action items today: Map your HS code against EU MFN rates and calculate Day-1 FTA savings. Audit your supply chain for rules of origin compliance. Obtain EU certifications (CE, WHO-GMP, CEP, GOTS) now so you can ship immediately when the FTA enters force. Register with PHARMEXCIL, EEPC, or AEPC for FTA implementation alerts. Engage AJG to pre-qualify EU buyer relationships ahead of FTA conclusion.

CBAM is designed to prevent carbon leakage — the risk that EU manufacturers facing a domestic carbon price are undercut by importers from countries without equivalent carbon pricing. EU importers of covered goods must purchase CBAM certificates equal to the carbon price that would have been paid under the EU ETS. At approximately EUR 65-80 per tonne of CO2, this is a significant cost for carbon-intensive Indian steel and aluminium producers.

India-specific impact: India steel averages approximately 2.5-3.0 tonnes of CO2 per tonne of crude steel versus the EU average of 1.8 tonnes. Indian steel exporters to EU face a CBAM premium of approximately EUR 45-95 per tonne — a significant competitive disadvantage for commodity steel grades.

The opportunity: Indian steel producers investing in electric arc furnaces, green hydrogen-based DRI, and renewable energy can reduce their carbon intensity toward EU levels, dramatically reducing CBAM liability and potentially achieving a competitive advantage. Tata Steel, JSW, and SAIL have announced decarbonisation roadmaps aligned with this opportunity.

What exporters must do now: Calculate your embedded carbon intensity per tonne using EU-approved methodology. Register your EU importer in the EU CBAM registry. Submit quarterly CBAM transitional reports. Invest in Scope 1 and 2 emission reduction — every tonne of CO2 eliminated saves EUR 65+ in CBAM liability. Explore green steel certification (ResponsibleSteel) to signal low-carbon credentials to EU buyers.

India-UAE CEPA was negotiated in 88 days — a record for India. It provides 0% duty on 97.99% of Indian tariff lines exported to UAE. Two years in, bilateral trade has grown from approximately USD 72B to USD 85B — an 18% increase. But the headline numbers mask a more complex implementation story.

What is working: Engineering goods, pharmaceuticals, and gems have seen the most immediate benefit. Indian pharma exports to UAE grew 24% in the first two years. Engineering goods exporters from Gujarat and Maharashtra report 0% duty access has opened UAE supply chain opportunities previously blocked by the former 5% general duty.

What is not working: CEPA utilisation rate is estimated at 40-55%. Primary reasons: (1) Rules of origin documentation — many Indian SME exporters cannot substantiate 40% India value addition, (2) COO issuance bottlenecks at authorised issuing bodies, (3) UAE importer awareness gaps, (4) Sensitive product exclusions on both sides.

Lessons for India-EU FTA: The CEPA experience shows the importance of investing in COO issuance capacity before FTA entry into force, training Indian MSMEs on RoO compliance, and establishing bilateral trade facilitation committees to resolve early implementation disputes.

The arithmetic for Indian textile exporters to EU is stark. A Vietnamese garment manufacturer pays 0-9% EU duty while an Indian manufacturer pays 12% MFN. On a EUR 100 invoice, the Indian product costs EUR 12 more at EU customs — a decisive disadvantage in a margin-compressed industry.

The competitive tier: Tier 1 (0% duty): Bangladesh, Cambodia, Myanmar, and Vietnam (EVFTA). Tier 2 (reduced): India (GSP approximately 9.6%), Pakistan (GSP+). India-EU FTA will move India to Tier 1 — but this is years away.

How Indian textile exporters can compete now: (1) Quality differentiation — Indian organic, handwoven, and GI-protected textiles command premium prices where 12% duty is proportionally less significant; (2) Sustainability credentials — GOTS, SA 8000, and OEKO-TEX certifications make Indian mills preferred suppliers for EU brands under CSRD pressure; (3) Vertical integration — integrated Indian manufacturers (spinning to garmenting) have better rules of origin compliance readiness for India-EU FTA Day 1; (4) EU ESPR readiness — invest in Digital Product Passport compliance now to be ahead of 2027 requirements.

India pharmaceutical exports to EU reached approximately USD 4.2 billion in FY2025. The corridor is dominated by APIs from Hyderabad, Ahmedabad, and Mumbai clusters destined for EU drug manufacturers, and generic finished dose formulations entering EU markets through licensed distributors. India supplies approximately 26% of all generic medicines consumed in the UK.

The regulatory gateway: EU pharma market entry is among the most complex in the world. Indian API manufacturers need either a CEP from EDQM or registration of an Active Substance Master File with an EU national authority. Finished dose manufacturers need EU GMP certification and a Marketing Authorisation. The full pathway from investment decision to first EU sale typically takes 3-5 years.

India-EU FTA pharma provisions: The IP chapter is the most contentious element. EU seeks data exclusivity provisions and patent term extensions. India resists data exclusivity as it delays generic entry — contrary to India constitutional health access obligations and Doha Declaration rights. The negotiated outcome will significantly shape the corridor future.

Opportunity sectors: (1) APIs — EU supply chain diversification push post-COVID actively creates Indian API opportunity; (2) Biosimilars — EU biosimilar market growing as biologics patents expire; (3) Contract manufacturing — EU pharma companies outsourcing to India WHO-GMP/EU-GMP certified facilities; (4) Nutraceuticals — EU market EUR 35B+ and growing.

The EU has committed to 42.5% renewable energy by 2030 and net zero by 2050. Achieving these targets requires massive installation of solar PV, wind, battery storage, and green hydrogen infrastructure. India, with growing solar panel and wind turbine component production capacity, is positioned to fill the gap that EU domestic manufacturing cannot meet.

Solar PV: Indian solar panel manufacturers — Adani Solar, Waaree, Premier Energies, Vikram Solar — have invested in EU-standard manufacturing. Indian-origin panels do not face the EU anti-dumping measures that apply to Chinese panels, providing a structural competitive advantage.

Green Hydrogen: India National Green Hydrogen Mission targets 5 MT production annually by 2030. EU REPowerEU plan targets importing 10 MT annually by 2030. The India-EU corridor for green hydrogen is nascent but strategically critical — requiring long-term offtake agreements, ammonia shipping infrastructure, and bilateral hydrogen certification frameworks.

Wind components: EU wind market targets 60 GW+ annual installations by 2030. Indian wind component manufacturers (towers, blades, nacelles) are export-capable and increasingly targeting EU OEMs including Vestas, Siemens Gamesa, and GE Vernova. EU type certification (IEC TC88 standards, CE marking) is the primary compliance requirement.