Mother of all trade deals: A small step for India-EU, a giant leap for the global economy—but don’t rush into beneficiary sectors

Several Indian sectors are likely to benefit from the FTA

• India-EU FTA is Mother of all trade deals
• Several Indian sectors likely to benefit from the FTA
• But don’t rush into beneficiary sectors without proper analysis

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India and European Union (EU) together comprise of 2 billion people, 25% of global GDP and one third of global trade. A free trade deal (FTA) between the two countries marks a giant step for the global economy. While the trade discussions have been happening for nearly two decades, more intense discussions started from 2022 and concluded on January 27, 2026.

Given the status of India-US trade deal, the India-EU FTA is symbolic in terms of India being able to find other markets for most of the goods that are exported to the US. It should also be viewed considering the global supply chain restructuring initiatives to reduce dependency on China. The deal will put the US on the backfoot and show cases that India will not compromise on access to agriculture and dairy because of the large farmer population which depends on these sectors. Taken positively it shows that India is willing to give access to higher-end products, such as wines, or niche agricultural products, such as kiwis etc. This might be a template along which the India-US trade deal can happen.

According to the EU perspective, 96% of goods exported by the EU are going to have reduced or zero tariffs, while the Indian perspective is that 99% of Indian exports will have privileged access.

Several Indian sectors are likely to benefit from the FTA. EU imports around $100 billion worth of footwear and leather goods. Currently, India exports around $2.4 billion to the EU in this category. The tariffs will be reduced to zero, from as high as 17%, immediately once the deal is in force. This should support Indian companies gaining larger market share over time. Another sector is marine products (tariffs of upto 26% to be reduced) which opens a market of $53 billion with a current export value of just $1 billion. Gems and jewelry sector currently at $2.7 billion exports to EU will be able to target the $79 billion imports market in the EU.

Apparel and textiles is a sector where India could see zero tariffs and access to a $263 billion EU imports market. Currently, India exports $7 billion to the EU. This could be a significant boost to Indian manufacturers in this sector. Plastics and rubber are another EU imports market worth $317 billion of which India currently has a share of only $2.4 billion. Chemicals is another sector worth $500 billion EU imports market where India gets privileged access.

Medical devices including spectacles, lenses and measuring and testing equipment could find a large market. Similarly, engineering goods get access to a $2 trillion market of which current share is only $16. 6 billion.

On the services side, the IT/ITes, professional services, educational services and R&D and other knowledge-based services will get a boost with predictable visa frameworks to support business development and delivery in the EU. This will also support Indian students to continue post-study work in the EU.

Traditional medicine including Ayurveda is also going to find a large market.

From an investment perspective, one should not get too excited and act in haste. There is no reason to start investing in any of these sectors without proper analysis. Of course, the market leaders in these sectors are likely to get the maximum benefit from the privileged market access. One needs to estimate how much gains each company has in terms of revenues from this over the next 3-5 years. This needs to be incorporated in the valuation models and then the revised intrinsic value needs to be compared to the current market prices. Only if the market price is significantly lower than the intrinsic value would it make sense to invest in those companies.

What one can definitely focus on is being aware of the sectors or growth vectors which are likely to benefit given the above FTA details. For example, Services and Industries are two growth vectors which get a significant boost from this. A portfolio approach to this growth vector which focuses on the full universe of Services companies and at any given time invests in a select set of companies which are significantly mispriced given the growth opportunity is likely to deliver satisfactory returns over the long-term as the FTA benefits unfold. Similarly, the Industries growth vector would benefit from the access to engineering markets.

We would suggest a disciplined approach to companies in these sectors following the Scientific Investing Framework as opposed to a knee-jerk reaction to ad-hoc stocks which are touted as beneficiaries of the FTA.