EU–India Trade Deal: A Transformational Agreement Opening New Pathways for Business

The EU and India have yesterday (27 January 2026) concluded a landmark trade agreement that is set to remove up to €4 billion in tariffs on EU exports and could double the volume of European shipments to India.

The deal marks a major step in India’s efforts to open its economy, attract foreign investment and strengthen its position in global supply chains. It is set to become the largest free trade agreement India has ever concluded.

With tariff reductions spanning key EU export sectors including automotive, food & drink, machinery, chemicals, pharmaceuticals and industrial goods, businesses on both sides stand to benefit from lower costs, simplified access and new opportunities for market expansion.

Below are the headline commitments of the agreement, which remains subject to approval:

• Automotive: Car duties will, over a period, fall from 110% to as low as 10%, subject to a quota of 250,000 vehicles a year.
• Machinery, chemicals and pharmaceuticals: Tariffs of up to 44%, 22% and 11% respectively will be largely eliminated.
• Steel and iron: Levies of up to 22% phased out over ten years.
• Food & drink: Tariffs above 36% on many European food products will be reduced or removed.
• Wine & olive oil: Wine duties drop from 150% to 75%, eventually reaching 20%; olive oil duties fall from 45% to zero over five years.
• Processed foods: Up to 50% tariffs eliminated on goods such as confectionery and bakery products.
• Preferential access: More than 99% of Indian exports will gain preferential entry to the EU.
• Sustainability: The EU has committed €500m to support India’s decarbonisation efforts.
• Notable exclusions: The Indian dairy industry as well as European agricultural sectors such as beef, chicken, rice, sugar and ethanol were excluded from the agreement.

Alongside the economic measures, both parties have agreed on strengthened co-operation in security and defence and have committed to working together in support of a rules‑based international order. Against a backdrop of global geopolitical uncertainty, this alignment speaks to India’s appeal as a politically stable, growth‑focused partner actively building the strategic relationships needed to meet its long‑term ambitions.

For Indian entrepreneurs and businesses, the agreement represents a significant expansion of opportunity across multiple sectors. In ready‑made garments, for instance, India’s market share is projected to rise from 5% to more than 8%, helped by tariff reductions that will level the playing field with competitors who already enjoy duty‑free access to the EU.

More broadly, the deal is expected to strengthen India’s position in global supply chains and encourage increased manufacturing activity within the country. The anticipated easing of movement for skilled professionals — a longstanding priority for India — will also benefit businesses reliant on specialised talent and cross‑border operational capability.

Why This Matters for Business Owners

The agreement is set to reshape trade flows between two of the world’s largest economies. For EU businesses and entrepreneurs, reduced duties and streamlined access make India a considerably more competitive and attractive export destination. For Indian counterparts, preferential entry into the EU, the world’s largest single market, provides a significant edge in sectors ranging from manufacturing to agriculture.

Ahead of the agreement’s full approval and implementation, clients should begin preparing now to ensure that regulatory and legal compliance steps are clearly understood. Much of the technical detail will evolve in the coming months, but both sides have signalled a strong desire to facilitate a smooth transition.

Once the terms are finalised, businesses will be able to make firmer investment and operational plans and should begin assessing the impact on supply chains, pricing models, cross‑border compliance requirements and long‑term market strategies as the agreement moves toward implementation.

Kim Lalli, Partner and Head of the Firm’s India Practice, said:

This agreement represents one of the most significant openings of the Indian market in decades. Clients operating in manufacturing, automotive and consumer goods will find new export routes and opportunities opening up to them. For European businesses in particular, this will help them in replacing some of the deficit that is likely to result from US tariffs. For Indian exporters, near‑universal preferential access to the EU is transformative, and of course, they may also be affected by US tariffs so this will reduce the impact of those. We expect increased activity in sectors such as textiles/garments, engineering goods, pharmaceuticals and processed foods. The agreement is yet to go through approval and ratification processes and more detail is to come. With opportunity comes complexity: companies on both sides will need to navigate standards, customs procedures and local compliance rules carefully to fully realise the benefit of the deal. Now is the time for companies and entrepreneurs to start thinking about reviewing contracts, supply chains, pricing strategies, regulatory and tax planning, so that they can move quickly once the agreement enters into force.

For conversations around how you or your business could take advantage of this shift, please contact Partner Kim Lalli as we’d love to carry on the conversation with you.