By Shivaji Sarkar
The India–European Union Free Trade Agreement announced on January 27, 2026, is being sold as the largest bilateral trade pact either side has ever signed. That description is accurate—and deeply insufficient. This is not simply a deal about tariffs and market access. It is an alliance forged under pressure, a $27-trillion act of economic self-defence, and a direct response to a world in which the United States has weaponised trade once again.
At one level, the pact seeks to recover lost ground. At another, it quietly reshapes global commerce by redistributing market share—away from smaller export-dependent economies and toward two large, bruised but resilient blocs. The consequences will ripple from South Asia to Southeast Asia, long after the celebratory headlines fade.This is not a win-win story. It is a reallocation of advantage.
Would it have more ramifications? India being the BRICS chairman this year has to lead and expand it. Hypothetically in a de-dollarise move could the EU be dragged into it? Not easy to answer. Russia and EU countries have daggers drawn. Would they come together?
Additionally, would the deal be as useful as projected for India! Is India really on top as the US trade representative Jamieson Greer says. Or it is dragged into a situation where imports of European cars, liquors, bakeries and other goods could roil Indian manufacturing and cause job losses? It needs a detailed study.
A Deal Born of Coercion, Not Courtship
The agreement spans nearly 2 billion people and close to 25percent of global GDP, creating an integrated market worth roughly $27 trillion. Current India–EU trade stands at $136.5 billion annually. On paper, that figure looks underwhelming relative to scale. In reality, it reflects how both sides were pushed into action.
Donald Trump’s return to office brought back tariff maximalism as state policy. In August 2025, Washington imposed 50percent tariffs on Indian goods, effectively destroying an estimated $36 billion in exports, nearly 1percent of India’s GDP. Europe fared little better: EU exports were hit with 15percent US tariffs, while Brussels was pressured into committing $600 billion in American investments and $750 billion in long-term energy purchases—terms many European policymakers privately described as economic arm-twisting.
The India–EU FTA is a counterstroke for rebuilding export volumes outside the US market and reduce exposure to unilateral trade shocks.
Projections suggest India could gain $75 billion in incremental exports, while EU exports to India could double by 2032. Total trade may rise to $250–300 billion within a decade. But these gains come with redistribution effects that will not be evenly felt.
The Architecture of Advantage
Under the agreement, India will eliminate or sharply reduce tariffs on 96.6 percent of EU goods, delivering annual savings of up to €4 billion for European exporters. In return, the EU grants near-zero-duty access to over 99percent of Indian exports, with 90percent liberalised immediately.
This asymmetry is deliberate. India gains scale and employment; Europe gains certainty and diversification away from China and the US. Smaller exporters, however—Bangladesh, Vietnam, Cambodia, Sri Lanka—lose the preferential margins that once sustained their competitiveness.
Textiles: Where the Ground Shifts First
India currently exports just $7.2 billion worth of textiles to the EU, despite the bloc importing $263.5 billion annually. India’s market share—2.7percent—has long lagged behind Bangladesh and Vietnam, whose duty-free access offset India’s scale and capacity. That gap closes overnight.
The removal of 11–12percent EU tariffs allows Indian exporters to undercut rivals on price while offering deeper supply chains. Industry estimates suggest 20–25percent annual growth, pushing exports beyond $11 billion within five years and adding $8–10 billion annually by 2032.
The implications are political as much as economic. Textile exports originate in 342 Indian districts, spanning Tiruppur, Surat, Moradabad, Bhadohi and Karur. Few trade agreements translate so directly into jobs—6–7 million by some estimates—and electoral relevance.
For Bangladesh and Vietnam, however, the message is stark: preference erosion has arrived. How would that reflect on India in international arena is yet to be understood.
Pharma: Europe’s Relief or India’s Gain
India’s pharmaceutical presence in Europe has always been constrained more by regulation than capability. In 2024, India exported $2.95 billion in formulations to the EU—barely 2.2percent of the market.
The FTA dismantles this bottleneck. Tariffs of up to 11percent will be phased out, while regulatory procedures are streamlined for Indian generics, and biosimilars. The result is twofold: European healthcare systems see cost relief, while Indian firms finally scale in a high-value market.
Consumer prices could fall 10–20percent in the short term, expanding to 40–70percent over three years as volumes rise. For India, the payoff is $5–8 billion in new annual exports by 2035—and a strategic foothold in a market once dominated by US and Swiss majors.
Gems, Jewellery and Leather: Leverage
In gems and jewellery, tariff elimination (up to 4percent) converts India’s craftsmanship advantage into a pricing weapon. Exports to the EU—currently $2.8 billion—could rise by $3–5 billion annually, benefitting Surat and Jaipur in particular.
Removal of 17percent tariffs neutralises Southeast Asia’s advantage in leather and footwear sector, unlocking $2–3 billion in additional exports. Tamilnadu, Uttar Pradesh and West Bengal stand to gain—but again, at the expense of competing low-cost exporters.
Marine Exports and Autos-Gains
Indian seafood, long penalised by EU tariffs as high as 26percent, becomes competitive. Access to premium segments—shrimp, cuttlefish, frozen fish—could add $2–3 billion annually, reinforcing India’s position as a global marine exporter.
Automobiles and components tell a subtler story. With 90percent of Indian auto goods gaining immediate duty-free access, component exports—currently $2.5 billion—could rise by $1.5–2 billion, especially for firms like Bharat Forge, Motherson, Tata Motors and Mahindra.
The Message to the World
The India–EU FTA is not a protest against American protectionism; it is a workaround. It signals that when the world’s largest economy abandons predictability, others will build parallel systems—large enough to matter.
For India, the deal accelerates its shift from tariff victim to market maker. For Europe, it hedges against over-dependence on both Washington and Beijing. For smaller export economies, it marks the beginning of a harsher era where scale, not sympathy, determines access.
Global trade is not fragmenting—it is re-aggregating around power. And in that recalibration, India and Europe have decided they would rather shape the rules than plead for exemptions.
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