Explained: How Europe expects India-EU trade deal to boost its economy

The European Union has reached a landmark free trade agreement (FTA) with India, one of the world’s fastest-growing major economies. This will be India's 19th trade deal, helping it boost exports to the 27-nation bloc.

It is expected to lower duties for Indian exports, including from labour-intensive sectors, such as garments, leather, pharmaceuticals, steel, petroleum products, and electrical machinery, making them more competitive in the EU. Similarly, Indian services exports, including telecommunications, business services, and transport, are also expected to grow significantly.

The deal opens up India’s services market to EU firms, with particularly strong commitments in financial and maritime services. These are the most ambitious concessions India has offered in any trade agreement so far, giving EU companies a clear advantage.

The deal is also seen to help European industry significantly, slashing tariffs and opening markets. It will make it easier for European companies to do business in a country of more than 1.4 billion people, says a report on the European Commission (EC) website. For the EU, the agreement is not just about trade, but also about jobs, competitiveness and strategic influence at a time of global uncertainty, it adds.

Here is how the FTA helps EU industries, according to the EC website:

Why is India so important for the EU?

India is the world’s fourth-largest economy, yet EU exports to the country remain relatively low. One key reason is India’s high import tariffs and complex regulations. The trade deal is designed to remove many of these barriers and unlock a market that EU businesses have long struggled to access.

What is the EU hoping to gain overall?

The European Commission expects EU exports to India to double over time. The agreement will cut or eliminate tariffs on more than 90% of EU goods, saving exporters up to €4 billion a year in duties and making European products more competitive.

Which sectors stand to benefit the most?

Manufacturing is a major winner. India will sharply reduce tariffs on machinery, chemicals, pharmaceuticals and vehicles.

For example, import duties on European cars will fall from 110% to 10% within a quota system, while most machinery exports will face zero tariffs. Sectors such as aircraft, medical equipment, steel and plastics will also gain easier access.

What does the deal mean for European farmers?

EU agri-food exporters will see major tariff cuts on products such as wine, spirits, olive oil, processed foods and fruit juices. Some duties, previously as high as 150%, will be reduced dramatically or scrapped altogether. At the same time, sensitive EU sectors like beef, sugar and rice are excluded, limiting the risk to European farmers.

Will small European businesses benefit too?

Yes. The agreement includes a dedicated chapter for small and medium-sized enterprises. It promises simpler customs procedures, clearer rules and easier access to information, helping smaller firms trade with India at lower cost and with less bureaucracy.

What about services, not just goods?

The deal opens up India’s services market to EU firms, with particularly strong commitments in financial and maritime services. These are the most ambitious concessions India has offered in any trade agreement so far, giving EU companies a clear advantage.

Are EU standards being compromised?

No. All imports from India will still have to meet the EU’s strict health, safety and product standards. The agreement also includes legally binding commitments on labour rights, environmental protection and gender equality.

When will the deal take effect?

Before it can enter into force, the agreement must be legally finalised, approved by EU governments and the European Parliament, and ratified by India. Only then will its trade benefits start to apply.