India-EU trade deal promises major export boost, but some barriers remain

Under the deal, Indian textiles and apparel, which previously faced EU tariffs of around 12%, footwear with tariffs ranging from 8–16%, and auto components with 4–6% duties will benefit from substantial tariff reductions

• India-EU trade deal cuts tariffs on 98% of Indian exports and 97% of EU goods
• Indian textiles, footwear, chemicals, and consumer goods see major boost
• Some regulatory barriers and EU carbon taxes remain unresolved

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India and the European Union have reached a landmark trade agreement that will cut tariffs on nearly 99% of Indian exports to the EU and gradually eliminate duties on 97% of EU goods entering India over the next decade, providing a significant boost for labour-intensive manufacturing and processed consumer goods. However, some sensitive regulatory & standards barriers remain unresolved, experts note.

“This is a major win for Indian exporters, particularly in textiles, apparel, footwear, and other labour-intensive sectors, as well as processed agri and consumer goods,” Madhavi Arora, Chief Economist at Emkay Global Financial Services said in a note.

Under the deal, Indian textiles and apparel, which previously faced EU tariffs of around 12%, footwear with tariffs ranging from 8–16%, and auto components with 4–6% duties will benefit from substantial tariff reductions. Other sectors gaining include chemicals, marine products, and gems and jewellery. India will also sharply reduce tariffs on European wine, spirits, and beer to 30–50%, down from previous rates exceeding 110–150%, while processed agri products, sheep meat, bakery items, chocolates, and pet food will move to zero duty.

Arora added that the deal also addresses previously contentious areas such as EU tariffs on autos and spirits, data protection norms, and India’s priorities on data localisation, as well as greater mobility for labour and services.

Boost for auto sector

Automobile tariffs will fall to 10% for up to 250,000 vehicles, and duties on chemicals, machinery, electronics, and aircraft will be phased out gradually over the coming years.

In a report, Morgan Stanley analysts noted that the deal is  a “positive opportunity for European OEMs, particularly MBG and BMW” in the Indian market. They noted that India is “a relevant car market, 4.5mn units in CY25, with strong growth trends,” but cautioned that a number of trade barriers exist, which have historically limited imports.

Recent trade negotiations have already led to “a reduction for UK-built luxury cars in 2025” and now, with the signing of a deal with the European Union, import tariffs will be materially reduced, though “subject to a sales quota.” While German brands are very popular in India, particularly in the luxury segment, Morgan Stanley analysts point out that the market remains small, with India selling “~0.1mn cars priced above $40,000.” They added that although the premium market is expanding, it is “still too small a market today to justify domestic manufacturing,” making exports the more feasible route for European automakers.

Some issues remain unresolved

However, Arora noted that issues like the EU’s Carbon Border Adjustment Mechanism (CBAM) remains unresolved. Indian exporters in sectors such as steel and aluminium, currently subject to EU carbon taxes, may continue facing these charges, which could eventually expand to other industrial goods. EU exports entering India are not subject to comparable carbon levies.

“The tariff reductions across multiple sectors provide strong opportunities for Indian exports to grow in the European market, especially in labour-intensive manufacturing and consumer goods,” Arora added.

The agreement now awaits ratification by the European Parliament, a process that could take a year or more before it enters into force.