Policy Newsletter | January 2026

At Davos, global leaders highlighted the urgency of resilient trade and diversified supply chains in a fragmenting world economy. India's recently concluded free trade agreement with the European Union gives concrete shape to those discussions, setting the framework for deeper market access, regulatory alignment and investment flows across one of the world's largest combined economic blocs.

Walking the Davos talk - India's FTA with the European Union

Earlier this month, at the World Economic Forum in Davos, many leaders underscored a central theme: in a fracturing global economy, diversified trade partnerships and resilient value chains are critical. A week later, India finalized a long-awaited free trade agreement (FTA) with the European Union. The FTA translates many of the Davos signals into action. Dubbed the "mother of all deals", it locks in preferential market access covering roughly 99% of Indian exports and 96.6% of EU goods exports by value. The pact covers a combined market of 2 billion people and a quarter of global GDP, potentially reshaping trade linkages at a time when rising tariffs and geopolitical frictions are encouraging diversification.

Trade outcomes for India

1. 70.4% of tariff lines covering 90.7% of India's exports will have immediate duty elimination for labour-intensive industries.

2. 20.3% tariff lines covering 2.9% of India's exports will have zero duty access over 3 and 5 years.

3. 6.1% tariff lines covering 6% of India's exports will have preferential access by way of tariff reduction or through tariff rate quotas.

Trade outcomes for European Union

1. 49.6% of tariff lines will have immediate duty elimination

2. 39.5% of tariff lines are subject to phased elimination over 5,7 and 10 years

3. 3% of products are under phased tariff reductions and few products are subject to tariff rate quotas

Talent Mobility

The FTA establishes an assured regime for temporary entry and stay for professionals, including business visitors, intra-corporate transferees, contractual service suppliers and independent professionals.

Intellectual Property

The FTA reinforces intellectual property protections provided under TRIPS relating to copyright, trademarks, designs, trade secrets, plant varieties and enforcement of IPRs.

What this means for business:

1. Manufacturers and Exporters in India: Firms across a variety of sectors stand to benefit from immediate or phased tariff elimination, increasing their competitiveness in the European single market.

2. European firms: Will gain from lower duties and predictable access to India's rapidly expanding market.

Sectors in play

Indian sectoral beneficiaries include agriculture and processed foods, textiles and apparel, leather, footwear and other labour-intensive sectors, engineering goods and industrial manufacturing, chemicals, plastics and rubber, marine products and blue economy, gems, jewelry and handicrafts, medical devices and precision instruments, services and knowledge economy.

European beneficiaries include advanced manufacturing and engineering, automotive and mobility, chemicals and green inputs, lifesciences, high-end food and beverages.

Key Business and Regulatory Implications of the India–EU FTA:

1. International Trade: The FTA's near-comprehensive tariff elimination, product-specific rules of origin, tariff-rate quotas, and self-certification framework will materially reshape the trade compliance architecture. Implementation will test customs administration, verification mechanisms, and enforcement coordination, with supply chain configurations increasingly influenced by auditability and regulatory risk management.
2. Corporate, M&A and Private Equity: Enhanced market access and improved regulatory predictability are expected to influence capital allocation decisions and cross-border investment flows. The agreement may serve as a catalyst for joint ventures and acquisitions in manufacturing, engineering goods, chemicals, medical devices, agri-processing, and services, contingent on domestic regulatory alignment and sector-specific approvals.
3. Employment: Expanded mobility commitments for intra-corporate transferees will place greater emphasis on the interaction between immigration regimes, social security frameworks, and domestic labour law. Effective implementation will require administrative coordination to ensure clarity, consistency, and enforceability across jurisdictions.
4. Technology, IP and Data: Provisions affecting IP-intensive sectors such as pharmaceuticals, medtech, software, advanced manufacturing, and creative industries will shape approaches to licensing, enforcement, and cross-border R&D collaboration. The agreement's impact will depend on how national authorities interpret and apply safeguards around proprietary technologies and data governance.
5. Regulatory and ESG: ESG-linked obligations embedded in EU market access requirements are likely to raise regulatory thresholds for Indian exporters. Compliance with environmental standards, traceability norms, responsible sourcing, and sustainable manufacturing practices will increasingly intersect with trade policy, influencing both regulatory oversight and competitiveness.
6. Policy Advisory: The FTA's phased rollout, safeguard mechanisms, and regulatory framework will evolve through secondary legislation, notifications, and administrative practice. Continuous policy monitoring, stakeholder consultation, and engagement with Indian and EU authorities will be critical to managing transition risks, resolving interpretive issues, and tracking the trajectory of regulatory convergence.

What to expect next:

1. Implementation and ratification the agreement still requires formal legal vetting and ratification by the EU parliament, member States and Indian authorities.

2. Regulatory dialogues on services liberalization, intellectual property and sustainability frameworks (including carbon border adjustments) will determine sector specific opportunities and compliance paths.

3. Parallel talks on investment protection and facilitation could unlock capital flows into manufacturing hubs, technology services and green industries

4. Business models in sectors like automotive, electronics, pharmaceuticals and high- value services are likely to evolve toward integrated India-EU supply chains.