Introduction
The Free Trade Agreement between India and the European Union, signed in early 2026, is a landmark event in the history of Indian trade policy. This is the result of almost 20 years of developing an exhaustive agreement between the two largest markets in the world - India and the EU - that is expected to fundamentally change how these two countries trade, invest and collaborate economically. The Free Trade Agreement aims to remove tariffs on the majority of goods, expand access to services markets, eliminate regulatory barriers and facilitate greater economic engagement. Collectively, India and the EU account for approximately 25% of the world's GDP and will be home to almost two billion people; this Free Trade Agreement will change the game for businesses of all shapes and sizes on both sides of the agreement.
In addition to the standard benefits provided to Indian exporters, new start-up companies in India will have unprecedented access to previously restricted, higher-end European markets. In addition to traditional trade benefits, this Free Trade Agreement also includes provisions regarding regulatory cooperation, investment agreements and assisting small- and medium-sized businesses. This will significantly increase opportunities in California and elsewhere across numerous industries.
Benefits for Exporters
The India - EU Free Trade Agreement will provide Indian exporters with more access than ever before to European markets due to substantial reductions in tariffs on almost all traded goods. There will be no or very little duty (tariff) applies to a majority of products that will be exported from India to the EU for example, labour intensive exports like textiles, apparel, leather goods, footwear and gems/jewellery will have preferential access at zero-duty - at present these goods are prohibited from being exported due to high tariffs of up to 26% or more.
The India - EU FTA will also allow Indian exporters to enjoy equal access to export markets as other Asian countries who already have preferential access to the GDP markets of Europe through preferential tariff rates for products for roughly 99.5% of total exports (by value) of bilateral trade (between India and the EU) - thereby allowing Indian exporters to diversify their export base away from traditional markets and reduce reliance upon less stable markets.
As well as lowering or eliminating tariffs on goods and services, the India - EU FTA will benefit exporters by providing for the simplification of customs processes and regulatory arrangements that provide for greater ease of logistics and quicker processing times at export/import borders, thus providing additional predictability with respect to exports and imports between India and the EU. Over time, these measures can lower transaction costs and enhance supply chain efficiency, making Indian products more competitive internationally.
Benefits for Startups
Startup companies,s particularly within technology, services, digital platforms and specialised manufacturing, have several potential advantages arising from the India-EU trade deal. Generally, these advantages are similar to those found in many existing FTAs that are primarily designed to facilitate trade between countries through the exchange of goods, however, one of the most striking features of the India-EU FTA is that in addition to providing for enhanced market access between the two parties in terms of trade in goods, the agreement also covers service market access and regulatory cooperation, enabling Indian startups to better access and develop their businesses throughout European markets.
In particular, Indian startups engaged in the provision of IT services, fintech solutions, digital platforms or other professional services will gain from having more comprehensive regulatory frameworks for providing services to the growing EU services market, that will facilitate the provision of services between the two markets through an increased number of clear rules regarding the delivery of services across borders, and also around the movement of professionals and/or employees so that they can more readily engage with clients located within the EU without having to deal with non-tariff barriers.
The inclusion of SME (small and medium-sized enterprises) support mechanisms in the agreement (such as dedicated SMEs contact points and shared digital platforms) will also provide small startup companies with the ability to more easily navigate through the tariff schedules, market entry requirements and customs procedures of the EU member states. These measures and support mechanisms are intended to allow SMEs to have the information and the tools necessary to facilitate them using the preferential access that will be made available to them under the FTA more effectively and economically than without the FTA being in place, thereby making the FTA more inclusive and providing early-stage SMEs with the same benefits as larger companies.
As part of the global economic crisis, also outlined in this agreement is the commitment to supporting startup companies' strategies for diversifying their sales by allowing them to gain access to the premium European Union for international commerce. Through opening this market to startups, they are not only able to diversify their sales but they also are able to reduce their dependence on traditional export markets and establish more stable international revenue streams. This is especially timely due to the recent recalibration of global supply chains resulting from geopolitical and tariff pressures.
Benefits for Corporations
The India-European Union Free Trade Agreement (FTA) allows multinationals and large businesses to expand the marketplace for their goods, have greater investment security, and integrate more deeply into international supply chains. The reduction of tariffs will also provide a more predictable regulatory system whereby Indian firms that produce engineering goods, pharmaceuticals, chemicals, automotive parts and large pieces of machinery can expand their operations into European markets more aggressively.
For capital-intensive industries, lower tariffs along with more efficient customs procedures will reduce the price of exporting manufactured products and create a level playing field among established Indian manufacturers, regional suppliers and global suppliers. Over time, these measures will lead to higher export volumes from India, increased manufacturing capacity and increased market share in the world market.
By providing services to those Indian corporates who are providing financial, consulting, logistics, or knowledge-based services, the FTA will provide additional benefits to those businesses with a clearer understanding of how to deliver services across borders. Improved Co-operation on regulations and resolution of disputes will also build confidence for Indian businesses wanting to establish subsidiaries or joint ventures or form partnership agreements within Europe.
The India/European Union Free Trade Agreement will also reduce the input cost of raw materials from Europe for use in manufactured goods produced in India. This reduction in input costs will allow for greater competitiveness of both the goods and the raw materials produced in India. Cheaper inputs can enhance product margins and encourage expanded manufacturing in India for both domestic use and export.
How Businesses Can Maximise These Benefits?
Companies will need to take proactive strategic actions to make the most of the India–EU FTA. Exporters should evaluate their product lines to determine which products can be exported at preferential tariff rates based on EU market regulations and to invest in complying with these regulations. Certification, quality management systems, and appropriate customs documentation (i.e., certificates of origin) are necessary in order to take advantage of duty-free or preferential tariff rates when exporting.
Startups should dedicate themselves to developing service offerings that not only gain access to the EU marketplace but also align with customer requirements and facilitate local partnerships/distribution channels to enhance their on-the-ground presence within the EU. Startups should also participate in EU-based trade missions, digital/online marketplaces, and accelerator networks to build visibility and credibility within the EU marketplace.
Corporations need to explore using the India–EU Free Trade Agreement as a method to adjust their supply chain in order to save on tariffs and gain efficiencies in input costs. Corporations can develop investment plans that align with the timeline of the agreement and take advantage of regulatory cooperation mechanisms to facilitate cross-border operations between agencies. To facilitate the growth of corporations' export readiness, corporations should also consider strategically investing in logistics, compliance, and certification infrastructure.
Conclusion
The India – European Union Free Trade Agreement (or FTA) that will come into force in 2026 fundamentally changes the way that the world engages in global commerce and provides a unique opportunity for Indian exporters, start-ups and corporations to tap into one of the biggest markets in the world.
Lowering import duties, increasing access to international markets through enhanced regulatory co-operation, and meeting large-scale production requirements are just some of the ways in which this agreement enables Indian businesses to gain a competitive advantage within the highly profitable context of the European Union.
In addition to trading opportunities, this agreement also enhances the economic relationships between India & Europe, encourages diversification within the global value chain, and promotes further inclusive, sustainable, and resilient economic growth.
By exercising good business practices when implementing as well as strategically adjusting to business process changes as a result of this unprecedented agreement, Indian businesses can achieve the full potential of this landmark trade deal by creating a significant increase in exports, employment opportunities, innovative ideas, and long-term business relationships.
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