Labour-intensive sectors like textiles and gems expected to benefit from preferential access to European markets.
28 Jan 2026 | 275 Views | By Shristi Ohri
India and the European Union have signed a long-awaited Free Trade Agreement at the 16th India-EU summit, potentially creating opportunities for companies on both sides, according to a report by BNP Paribas.
The deal arrives at a crucial moment as global trade faces tariff-driven volatility, with India seeking to ...
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India and the European Union have signed a long-awaited Free Trade Agreement at the 16th India-EU summit, potentially creating opportunities for companies on both sides, according to a report by BNP Paribas.
The deal arrives at a crucial moment as global trade faces tariff-driven volatility, with India seeking to boost its labour-intensive sectors including textiles, leather, footwear, and gems and jewellery through the agreement.
India-EU bilateral trade stood at USD 136.5 billion in FY25, with India's goods exports to Europe totaling approximately USD 76 billion, representing 17-18% of India's total goods trade. European imports to India were around USD 61 billion.
Under the FTA, India gains preferential access to EU markets across 97% of tariff lines, covering 99.5% of trade value. This benefits labour-intensive sectors comprising more than USD 33 billion of annual exports to the EU, which currently face import duties between 4% to 26% that will now be eliminated.
BNP Paribas analysts note that the timing is particularly significant for some sectors that have experienced considerable declines in exports to the United States this year. Data shows gems and jewellery exports to the US fell 44% in April-November 2025, while textiles declined 10.4% and readymade garments dropped 1.9% during the same period.
For European exporters, the EU statement indicates the deal is expected to double EU goods exports to India by 2032 by eliminating or reducing tariffs on 96.6% of EU goods exports to India, potentially resulting in EUR 4 billion in annual duty savings.
The agreement is anticipated to benefit EU sectors including automobiles, machinery, chemicals, pharmaceuticals, alcoholic beverages, and confectionery. The EU also expects privileged access to India's services market, including financial services and maritime transport.
Sensitive sectors like agriculture and dairy have been largely excluded by both sides from the agreement.
The deal must now be ratified by the European Council and European Parliament before taking effect.
According to the BNP Paribas report, weighted average tariffs on textiles and clothing currently stand at 10% from the EU side and 9.5% from India, while automobile tariffs are 3.7% for EU imports and 35.5% for Indian imports.