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The India-EU Free Trade Agreement is signed! A big step forward for the Indo-European partnership and certainly a pivotal moment. Time to take action!
Here are the topics of this week:
“The Mother of all Deals” is signed and what the EU-India FTA actually means (Check out the free tool in the article).
India’s new budget is published and what it could mean for European businesses.
Germany’s BASF and France’s L’Oréal open Tech Hubs in Hyderabad.
And much more.
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Number of the Week
25%
The EU-India Free Trade Agreement covers a quarter of both the global population and the global GDP.
Rise of the Week: “The Mother of all Deals” is Signed
The EU and India signed their long awaited Free Trade Agreement (FTA). What started back in 2007 and stalled for an extended period in 2013, finally lead to an agreement between the two largest democracies last week after discussions were relaunched in 2022. Apart from clear trade benefits, the provision of a deeper strategic partnership and clearer rules could lead to much more positive outcomes for both regions.
Image partially generated with Google Gemini (2026)
You might have already read plenty about the details of the agreement, as this pivotal moment has been shared broadly in European, Indian, and global media alike. I’d like to break it down to a necessary detail before jumping into what I think the broader benefits are and share a tool with you that you can go back to:
This free “Cheat Sheet” and simple one pager provides you with all the relevant information that you might need:
***Note: If you think this tool might be helpful for your network, feel free to share it or guide them to this link.
The FTA provides good provisions for both sides and indicates that individual positions clearly were considered. Both the EU and India shared the outcomes from their individual perspectives, as well as in further detail chapter by chapter by the EU.
Some highlights from both a European and Indian perspective:
EU | India | |
|---|---|---|
Tariff reductions | On 96.6% of EU exports, equivalent to 93% in terms of value. | On 99.3% of Indian exports, equivalent to 91% in terms of value. |
Key sectors to benefit | Chemical, pharmaceutical, machinery, agri-food, medical devices, avionics, automotive | Chemicals, textiles, pharmaceuticals, footwear, fishery |
Actual implications are expected to be highly beneficial for both sides:
The EU expects to double its exports to India, saving exporters roughly EUR 4 billion in duties annually.
India will get cheaper access to key goods that are required for its economic growth, and aren’t easy for European businesses to relocate, such as machinery, certain automotive spare parts, or aircraft production.
We are looking at a total transformation of market access with potentially deep implications for global supply chains. The reduced tariffs will allow multinational businesses to integrate India into global manufacturing processes, which is also becoming more attractive given lower investment requirements (i.e. to set up production sites with equipment from Europe etc.) in the country itself.
Here are some of the industries that will benefit in particular:
Automotive: Phased reductions will slash tariffs to 10% for a quota of 250,000 cars from 110% today. This will significantly improve access to the third largest automotive market particularly for the premium sector from brands such as Mercedes-Benz, BMW, or Audi.
Consumer brands: Tariffs for alcoholic and non-alcoholic beverages and goods were reduced substantially, which will largely improve access to India’s vast consumer market.
Machinery and industrial goods: India’s growing manufacturing ecosystems rely on key machinery that it can now access substantially cheaper due to 0% tariffs down from 44%. Other sectors such as medical devices, chemicals or aerospace will profit equally.
Pharmaceuticals: India is a leading producer for generic medicines and with tariffs, and regulatory barriers, reduced, trade should increase substantially.
Textiles, apparel, leather: As the EU eliminated tariffs for these products, India’s sector is now on par with Vietnam or Bangladesh in terms of tariff levels, increasing competitiveness.
Agriculture: Sensitive products on both sides remain excluded from the tariffs, protecting the individual markets.
Services and professional mobility: A separate mobility agreement was signed with the FTA to facilitate movement for skilled workers and students.
Initial statements are proof of these benefits. Immediately after the FTA announcement, various sector representatives praised the outcome:
The Society of Indian Automobile Manufacturers (Siam) highlighted the benefit for exports and integration of India in global supply chains.
The CEOs of the German automotive leaders strongly support the FTA. This is especially notable after Volkswagen Group announced a stop of its plans to invest in a new Audi plant in the US due to tariff impacts.
French Renault announced further investments in both regions and will focus on India for its global market strategy. Especially noteworthy after a 33% growth surge year over year in January.
Germany’s Rhenus Group, an international logistics provider, highlights that the FTA provides predictability and clarity for businesses to invest. The company expects to profit from growing trade.
India’s electronics manufacturing sector will clearly benefit as well and is expected to trade USD 50 billion by 2031, on top of getting cheaper access to machinery.
Geopolitically, the implications are substantial as well. According to the Kiel Institute, the US imposed tariffs cost India around 1.6% of GDP that the EU-India FTA now hedges, as bilateral trade is expected to surge by 41-65%. Additionally, it will divert around 5-9% of trade from China de-risking both the EU’s and India’s supply chains.
While obviously important, let’s not forget that the FTA was announced during the EU-India Summit and part of the EU-India Comprehensive Strategic Agenda that has far reaching implications for deeper Indo-European collaboration:
Security & Defence Partnership: A new partnership was launched to strengthen dialogue on maritime security, cyber threats, and space. This includes creating an India-EU Defence Industry Forum to foster collaboration between businesses on both sides.
Technology & Innovation: Both parties agreed to deepen cooperation on critical technologies like AI, quantum computing, semiconductors, and 6G. They also plan to explore interoperability between their respective digital wallets and “tech stacks”.
Clean Energy Transition: The agenda reinforces the "Clean Energy and Climate Partnership", focusing on smart grids, storage, and renewable energy technologies.
Strategic Supply Chains: A commitment to jointly assess external vulnerabilities and expand collaboration in strategic value chains to ensure economic security.
Future Cooperation: The leaders agreed to hold annual summits and review progress through mechanisms like the Trade and Technology Council (TTC).
Overall, a pivotal moment for the Indo-European partnership. The FTA is a landmark agreement, as it is both a signal for global trade in a time of increasing trade barriers, and a pivotal moment for the two largest democracies to deepening ties and collaboration outside of trade as well. The formal ratification of the FTA will be crucial and businesses in Europe and India need to prepare taking action now.
Sources: EU Commission, Indian Government, Kiel Institute, The Economic Times, Die Zeit, Just Auto, Reuters, Aircargo News
What Else is Rising?
What India’s new Union Budget means for European Businesses
The Indian government announced latest budget plans for the fiscal year 2026-2027. This is not only a signal for the fastest growing economy, but also provides indications for European businesses on individual sectors. Several plans are of particular interest and should raise awareness for business to seek market share in India.
Our first kartavya is to accelerate and sustain economic growth, by enhancing productivity and competitiveness, and building resilience to volatile global dynamics.
The announcement used the word “Kartavya”, duty or obligation in Sanskrit and many Indian languages (see Curiosity Corner). In the Union Budget 2026–27, the government’s agenda is framed around three “Kartavyas”:
Accelerating and sustaining economic growth
Fulfilling people’s aspirations by empowering them, and
Ensuring inclusive development for every region and community
By doing this, the budget is presented less as a list of schemes and more as a statement of duties the state owes to its citizens.
These sector announcements are of particular relevance:
Infrastructure: Public CapEx will increase to INR 12.2 lakh crore (around EUR 135.6 billion) and cover highlights such as seven new high speed rails connecting growth clusters, new freight corridors, and cargo promotion schemes.
Manufacturing: The broader ecosystem receives actual capital allocations lead by the electronics components manufacturing scheme (INR 40,000 crore or around EUR 4.44 billion), carbon capture and storage (INR 20,000 crore or EUR 2.22 billion), or biopharma (INR 10,000 crore or EUR 1.11 billion)
Micro, Small and Medium Enterprises Fund (MSMEs): Smaller sized businesses receive dedicated growth funds of INR 10,000 crore (around EUR 1.11 billion) to support growth of domestic businesses, particularly in Tier-II and Tier-III cities.
IT & Digital Services: Taxation is clubbed under one scheme and thresholds increased. On top, foreign companies offering global cloud services from Indian data centers will receive a tax holiday until 2047.
Faster trade clearances: Structural improvements are meant to reduce custom times and trade frictions.
Energy transition: The aforementioned funding for carbon capture schemes should strongly improve decarbonisation measures and therefore sector collaborations.
Overall, businesses active in the cement, steel, logistics, real estate, EPC, or renewable energy industries, as well as all companies integrating India into their digital and physical supply chains should profit from stronger domestic capacity allocations. European businesses however should be aware that these strategic investments will continue to increase domestic competition as well.
Sources: The Economic Times
German BASF and French L’Oréal Set Up GCCs in Hyderabad
Telangana’s Hyderabad has become a key hub for Global Capability Centers (GCC) over the past few years and continues to attract major multinationals to set up and expand their presence. The world’s largest chemical company, Germany’s BASF, as well as the world’s largest beauty company, France’s L’Oréal, are joining the trend and announced GCCs.
Hyderabad offers all the attributes of a state-of-the-art Digital Hub with global reach. Seamless cooperation between the new Digital Hub in India and our existing global Digital Hubs, and excellent service delivery to our businesses, are the top priorities.
BASF will integrate Hyderabad into its global Digital Hub network spreading over Europe (Ludwigshafen, Madrid) and Asia Pacific (Kuala Lumpur). The company’s strategy is to reduce global headcount of its Global Digital Services division, and Hyderabad will be integrated into the company’s existing manufacturing and R&D activities in India.
L’Oréal follows a comparable path, but focuses on cutting edge technology deliverables. The very first “beauty technology hub” in India, increased AI and engineering capabilities are the new GCCs responsibility and will be integrated in the company’s global network consisting of tech hubs in France, China, the US, Spain, Singapore, Poland, Canada and Brazil.
The intentions are clear: access to India’s tech ecosystem. We covered this many times before and particularly why German companies increasingly leverage India’s technology ecosystem here.
Sources: BASF, Business Standard
Quick Risers
German Nemetschek Group will expand its GCC in Hyderabad and plans to double its workforce. (Source: The Economic Times)
German DEG, KfW’s finance unit, intends to grow its India portfolio and make it a top three market. (Source: MSN)
Sweden’s IKEA plans to double investments in India over the next 5 years. (Source: Reuters)
World bank commits annual financing in India of 8 to 10 bn USD. (Source: The Economic Times)
Spotlight: India’s Foreign Policy Challenges
The Indian Council on Global Relations recently published an article on India’s foreign policy challenges in an era of "fluid multipolarity”. Former ambassador Rajiv Bhatia argues that 2026 is the year for a hard pivot, moving beyond the rhetoric of the Global South to concrete "Plan B" strategies.
An interesting read on navigating geopolitics and you can find it here.
Curiosity Corner
Your random facts and stories about India and the Indo-European friendship.
This week: Kartavya - The Indian Ethos of Duty
"Kartavya" (from Sanskrit kṛ, "to do") translates to "that which must be done". But unlike the European concept of duty which is often viewed as a social contract where citizens fulfill obligations to secure legal rights, Kartavya is rooted in cosmic connection.
In Indian culture, duty is not a transaction but a repayment of Rina (debts) owed to nature, ancestors, and society simply for existing. It demands niṣkāma karma (selfless action), shifting the focus from "what am I owed?" to "what can I give?". As Gandhi noted, genuine rights are merely the natural fruit of duties faithfully performed.
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