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Recap: I hope you enjoyed last week’s guest article by Kunal Singla on “India is Europe's Next Growth Anchor”. My key takeaway: the free trade agreement is a door opener, but European business must take actions now and be locally present if they want to participate in India’s fast development.

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The tariff elimination for EU machinery exports to India under the new FTA. German industry association VDMA expects this to drive 10-15% export growth in 2026, with machinery shipments to India potentially reaching EUR 4.4-4.6 billion, up from EUR 4 billion in 2025.

As the EU and India just recently signed their long awaited Free Trade Agreement (FTA) dubbed as “The Mother of all Trade Deals”, the US appears to have expedited its own agreement with India. While details of the US-India FTA remain limited, first analyses of the interim framework indicate that the EU-India deal is much broader in scope and impact.

The EU-India FTA is a landmark agreement and was well perceived in both Europe and India, and a strong start to an in my view pivotal year for the Indo-European partnership particularly in context of geopolitical developments. While it was communicated in high detail and transparently, very limited information has been made available on the US-India trade agreement and therefore appears expedited in light of such landmark agreements, as shared by various outlets including CNBC.

It's important to note that these agreements operate in fundamentally different contexts. The US-India interim deal is designed as damage control following the Trump administration's imposition of 50% tariffs on India (25% standard plus 25% related to Russian oil purchases). The EU-India FTA, by contrast, builds a growth corridor from a relatively neutral trading baseline.

The interim framework between the US and India is built around three key pillars:

To achieve a potentially more balanced trade corridor and supply chain systems, both sides appear to commit to the following interim schemes according to The Hindu:

Around USD 90 billion of the USD 500 billion purchase commitment by India were reportedly already planned. India’s Commerce and Industry Minister Piyush Goyal provided more insights on India’s plans to meet these targets as critics were highlighting an imbalanced interim agreement. Goyal highlighted that the demand for imports far exceeds the purchase commitments, especially due to the accelerating data centre infrastructure build up, aviation sector needs and energy requirements, and therefore wouldn’t be of concern.

According to analysis by the Kiel Institute of the World Economy shared by Statista, the interim deal mitigates but doesn't eliminate the damage from US tariffs. Under the current 50% tariff regime, India's GDP faces a -1.64% impact. The interim agreement's tariff reduction scheme would improve this to -0.88%, still a net negative compared to pre-tariff baselines, but a significant improvement from the status quo. In contrast, Indian exports under the current tariff environment are projected to be 22-26% lower than they would be without these trade barriers.

On the other hand, the EU-India FTA provides clear added value for both sides with positive increases in exports and GDP. The GDP is expected to rise for both and with trade up by +41% for India and +65% for the EU, all on top of agreeing on deeper ties in defence, research and development, and other strategic areas (see last issue of India Rising).

The interim nature of the US-India agreement also matters for interpretation. Interim deals are by definition narrower in scope and often serve as stepping stones toward comprehensive FTAs. The question is whether the US will build on this foundation or whether the current framework represents the ceiling of their ambition. Early signals suggest the latter, particularly given the limited transparency around the agreement's terms and the purchasing commitment structure that places most of the adjustment burden on India.

In total, the Kiel Institute’s trade models highlight a crucial distinction: the US-India interim agreement primarily mitigates existing damage from recent tariffs, while the EU-India FTA creates net new trade growth from a neutral baseline. For India, the US deal prevents things from getting worse and the EU deal makes things actively better. For businesses operating in the Indo-European corridor, this distinction matters as the EU-India FTA establishes a stable, long-term growth framework rather than simply repairing a self-inflicted wound.

Sources: The Hindu, CNBC, Times of India, Statista

The EU-India FTA offers clear improvements for trade in the automotive sector with tariffs for EU exports to India being reduced from 110% to 10% (quota of 250,000 cars). As premium brands such as Mercedes-Benz or BMW with limited to no production capacity in India will benefit, the majority of the OEMs might face increasing competition. But another group in the ecosystem will most likely benefit the most.

India is the third largest automotive market, growing by 10-12% year-over-year and highly concentrated in terms of market share. Domestic and East Asian players dominate, with Volkswagen reaching only 1% market share and all European manufacturers combined only around 3%.

Local production and market understanding are key advantages that the market leaders understood early and continue doing so by increasing investments in India (see prior issues of India Rising). While this will increase competition for European OEMs, opportunities arise for automotive suppliers. The EU-India FTA is not only increasing access, but provides stability that will allow manufacturers to embed India in their global supply chains and become more price competitive in global markets.

Several announcements indicate how different players are positioning themselves:

Automotive suppliers expanding aggressively

OEMs chasing growth but struggling for scale

While the EU-India FTA reduces tariff barriers, it doesn't solve the structural challenges European OEMs face in India. Success in this highly competitive, price-sensitive market requires local production, deep market understanding, and long-term commitment, exactly what Indian and Asian competitors have built over decades.

A real opportunity for European companies lies in the supplier base: integrating India into global supply chains, leveraging lower production costs, and building the components that will power India's automotive future regardless of which brand name appears on the badge. For European automotive suppliers, the FTA provides the stability to make those investments. For European OEMs, it allows to compete in a market where they're already years behind.

Sources: DW, The Economic Times, Times of India, The Hindu

The machinery sector is a core pillar of the German and European manufacturing sector. VDMA, an association representing 3,600 German and European mechanical and plant engineering businesses, expects German machinery exports to India to grow by 10-15% in 2026. These exports reached approximately EUR 4 billion in 2025, and the industry is positioned to benefit substantially from recent developments in the Indo-European trade relationship.

The machinery sector is positioned to profit substantially from several developments:

While investments for local production from this sector are to be expected as well, VDMA's growth expectations indicate India's growing importance in European key sectors. The question will be whether European manufacturers can move quickly enough to capitalize on the tariff elimination before domestic Indian and machinery producers from other markets close the technology gap, or whether early movers can establish partnerships that create lasting integration in India's industrial supply chains.

Sources: The Economic Times, VDMA

Have you visited the India Rising homepage lately? I just updated it and added tools.

After getting asked repeatedly about upcoming conferences, summits, and networking events with an Indo-European focus or benefit, I decided to build a simple event calendar tool for you to access.

Right now it features tech summits, renewable energy forums, and more, but I know we're missing events. The calendar is curated, so if you know of any events that should be on the list, please share them and hit reply!

Take a look at the calendar here.

Your random facts and stories about India and the Indo-European friendship.

This week: US-India Relations - A brief history

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