EU–India Free Trade Agreement 2026

Key FTA guidelines and tariff provisions

Guideline / tariff provision

Details & sources

Deep tariff liberalisation and coverage: The FTA concluded on 27 Jan 2026 will create one of the world’s largest free‑trade zones. The European Union (EU) will reduce tariffs to zero on most Indian goods over a seven‑year phase‑out and will open 96.8 % of its tariff lines, while India will open 92.1 % of its tariff lines and reduce tariffs on 93 % of the bilateral trade value over ten years. Sensitive sectors such as automobiles, steel and agriculture are shielded from immediate liberalisation.

EU goods exports to India:

The EU announced that duties on over 90 % of EU goods exported to India will be removed or reduced, yielding savings of up to €4 billion a year in duties. Simplified customs procedures will make EU exports faster and cheaper, and a new digital trade chapter will ensure fair online commerce.

• Quota‑based car tariff cut: India will cut import duties on European motor vehicles from 110 % to 40 % immediately for a limited number of cars priced above €15 000 and gradually reduce these duties to 10 % over time. The Economic Times confirms that under the FTA, motor‑vehicle tariffs will be cut from 110 % to 10 % under a quota of 250 000 vehicles a year. Battery electric vehicles are excluded from duty reductions for the first five years to protect domestic EV investments.

• Alcoholic beverages and food products: EU tariffs on beer will be cut to 50 %, spirits to 40 %, and wine to 20 – 30 %. Duties on fruit juices and processed food will be eliminated, and tariffs on olive oil, margarine and other vegetable oils will be reduced to zero.

• Industrial goods (machinery, chemicals, pharmaceuticals): Duties of up to 44 % on machinery will be mostly eliminated, duties of up to 22 % on chemicals will be eliminated and duties of up to 11 % on pharmaceuticals will be eliminated. The EU said that tariffs on 90 % of optical, medical and surgical equipment and on almost all aircraft and spacecraft exports to India will also be removed.

• Gems, jewellery and base metals: In the EU table, pearls, precious stones and metals currently face duties up to 22.5 %, but the FTA will reduce tariffs to zero for 20 % of products and reduce tariffs on another 36 %. Indian exporters of gems, jewellery and engineering goods are expected to gain improved access to the EU market because the agreement eliminates tariffs of up to 10 % in labour‑intensive sectors.

• Chemicals & plastics: EU export duties up to 16.5 % on plastics and 22 % on chemicals will be eliminated. India will reduce tariffs on EU chemicals to zero for most products, while the EU will phase down its duties on Indian chemicals and plastics to zero over seven years.

• Agriculture and dairy: Tariffs on EU agri‑food products will drop significantly: olive oil and vegetable oils to 0 %, fruit juices, breads, pastries, biscuits, pasta, chocolate and pet food to 0 %, sheep meat to 0 %, and sausages and other meat preparations will see duties cut from up to 110 % to 50 %. Agricultural goods such as cereals, dairy and poultry remain largely excluded from tariff cuts on the Indian side.

• Digital trade, services and SMEs: The agreement introduces a digital trade chapter ensuring secure and predictable online commerce, provides strong protection for EU trademarks, designs, copyrights and trade secrets, grants privileged access for EU service providers in financial and maritime services, and establishes SME contact points to help firms trade and invest.

• Climate support and cooperation: The FTA includes €500 million in EU support over the next two years to help India cut greenhouse‑gas emissions and accelerate the green transition. A broader security and defence partnership was launched alongside the FTA.

Sector‑wise impact on Indian manufacturing

Industry / sector Expected impact of the FTA

Automotive & EV supply chain: India currently imposes 70‑110 % tariffs on imported cars; under the FTA these will drop to 40 % immediately and eventually to 10 % for a quota of 250 000 vehicles a year. EU carmakers will gain easier market access but EVs are excluded from duty cuts for the first five years to protect domestic investments. Indian automotive suppliers could benefit from cheaper European components and machinery, while domestic manufacturers may face stiffer competition and will need to invest in R&D and Just‑in‑Time (JIT) operations to remain competitive. Export opportunities may emerge for Indian auto parts and electric‑two‑wheelers if European OEMs look to India for cost‑efficient supply chains.

Textiles, apparel & footwear: The EU agreed to phase out tariffs on labour‑intensive sectors such as textiles, apparel, leather and footwear, which currently face duties up to 10 %. Duty‑free access will make Indian garments and leather goods more competitive in Europe. However, Indian producers must meet EU labour and sustainability standards to fully capture these gains.

Gems, jewellery & base metals: Tariffs up to 22.5 % on gems and jewellery will drop to zero for a significant share of products, improving margins for Indian exporters. EU customers will benefit from lower prices on Indian diamonds, gems and jewellery, encouraging exports.

Pharmaceuticals & life sciences: Duties of up to 11 % on EU pharmaceutical exports will be eliminated, potentially lowering the cost of imported drugs and APIs for Indian healthcare and manufacturing. The EU will also reduce or remove tariffs on Indian pharmaceuticals and medical devices, helping India’s generic drug makers expand into the EU market. Compliance with EU regulatory standards will be critical.

Engineering goods & capital equipment: Duties up to 44 % on EU machinery and up to 27.5 % on optical/medical equipment will mostly be eliminated. This will reduce the cost of importing advanced machinery, electronics and industrial equipment, supporting India’s manufacturing modernization. Lower input costs should enhance competitiveness for Indian engineering goods, auto components, precision manufacturing and renewable energy equipment.

Chemicals, plastics & speciality chemicals: Duties of up to 22 % on EU chemicals and up to 16.5 % on plastics will be eliminated. Indian manufacturers reliant on chemical intermediates (pharmaceuticals, agrochemicals, paints, etc.) will benefit from lower input prices. However, domestic chemical producers may face more competition from European suppliers and must upgrade technology and achieve economies of scale to remain competitive.

Food processing & beverages: Tariff elimination on fruit juices, processed food, olive oil and vegetable oils and reduced duties on wine (20 – 30 %), spirits (40 %) and beer (50 %) will make European products cheaper in India, challenging domestic beverage firms. Indian processed food exports, including ready‑to‑eat meals and spices, may gain improved access to the EU market as the EU phases out duties on Indian food products.

Agriculture & dairy: The FTA largely excludes sensitive agricultural sectors on the Indian side; tariffs on cereals, dairy and poultry will not be liberalised. Indian agri‑processors may still gain from reduced duties on processed food exports, but domestic farmers will continue to be protected.

Aerospace & defence: Duties on aircraft and spacecraft exports from the EU will be eliminated, potentially lowering costs of aviation equipment for India and promoting joint ventures in aerospace and defence.

MSME manufacturing clusters: Lower tariffs on machinery and inputs will benefit small and medium manufacturers across clusters like Pune, Coimbatore, Rajkot and Tiruppur. However, these firms will have to upgrade production processes, comply with EU standards and digitise procurement to take full advantage of the FTA.

Takeaways for Indian manufacturers

• Global competitiveness through cost reduction – Input costs for machinery, chemicals, plastics and pharmaceuticals will decline due to tariff elimination, enabling Indian manufacturers to modernise operations and improve margins.

• Compliance and standards – Duty‑free access to EU markets is conditional on meeting stringent standards for quality, sustainability and traceability. Manufacturers must invest in digital supply‑chain management, ESG compliance and worker safety.

• Opportunities for premium exports – Labour‑intensive sectors (textiles, leather, gems), engineering goods and automotive components will gain improved market access. Firms should leverage India’s cost advantages while upgrading design and innovation.

• Competition from EU imports – Cheaper imports of automobiles, alcoholic beverages, machinery and chemicals will intensify competition. Industries protected from immediate liberalisation (e.g., steel, agriculture) must use the transition period to improve efficiency.

• Strategic partnerships – The FTA includes cooperation on digital trade, services and climate, opening avenues for joint R&D, green technologies and supply‑chain partnerships with EU firms.

This overview summarises how the EU–India FTA reshapes tariff schedules, trade rules and industry dynamics. Indian manufacturers should align their strategies with these guidelines to seize export opportunities, manage competitive pressure and build resilient, compliant supply chains.

Sources: 

1. https://timesofindia.indiatimes.com/business/india-business/zero-tariffs-on-gems-jewellery-plastic-how-will-fta-with-eu-benefit-india-mother-of-all-trade-deals-explained/articleshow/127608915.cms
2. https://economictimes.indiatimes.com/news/economy/foreign-trade/india-eu-fta-details-mother-of-trade-deals-eliminates-aircraft-tariffs-cuts-duties-on-alcohol-food-chemicals/articleshow/127604286.cms
3. https://www.reuters.com/world/india/india-slash-tariffs-cars-40-trade-deal-with-eu-sources-say-2026-01-25