EU–India Trade Agreements
In January 2026, India and the European Union reached political agreement on a package of three interlinked instruments: a Free Trade Agreement (FTA), an Investment Protection Agreement (IPA) and a Geographical Indications Agreement ("GIA"). Hailed as the "mother of all deals", it is the result of nearly four years of negotiations.
The FTA provides for the phased reduction or elimination of tariffs on over 95% of the goods traded between the EU and India (by value), particularly in relation to industrial goods such as machinery, chemicals, engineering products and automotive components. Notably, the deal includes a commitment from India to lower its high tariffs on passenger vehicles and related products, over an agreed transition period to allow time for companies to adjust to the liberalisation. In parallel, the agreement expands access for EU services suppliers and introduces commitments on government procurement, intellectual property protection, sustainable development and regulatory cooperation.
Agriculture has been treated with a more cautious approach. While the agreement opens opportunities for selected EU agri-food exports such as wines, spirits and processed products, sensitive areas for both the EU and India including dairy and staple agricultural goods are excluded from tariff liberalisation. This calibrated approach reflects the importance of balancing market access with domestic policy considerations on both sides. Alongside the FTA, the standalone GIA strengthens mutual recognition and enforcement of protected product names, enhancing brand protection for producers operating in both markets.
Taken together, the EU–India agreements are comprehensive in-scope and demonstrate the importance both sides expect their trading relationship in the coming decades to be. They are expected to reduce trade friction, improve regulatory predictability and support increased investment flows, particularly in sectors aligned with advanced manufacturing, clean energy, life sciences and technology-enabled services.
Union Budget 2026–27 ("the Budget")
These external trade developments are complemented by India’s domestic reform agenda under the Budget, which placed strong emphasis on long-term growth, fiscal discipline and competitiveness. The Budget continues the government’s focus on manufacturing-led development, technological capability and infrastructure expansion, while also seeking to enhance certainty for foreign investors.
A central policy initiative is India Semiconductor Mission 2.0, which marks a shift from assembly-focused activity towards higher-value segments of the semiconductor supply chain, including equipment, materials and domestic intellectual property creation. This is supported by increased funding under the Electronics Components Manufacturing Scheme and targeted customs and tax measures designed to strengthen domestic manufacturing capacity and reduce reliance on critical imports.
The Budget also advances India’s ambitions in digital infrastructure. Long-term tax exemptions have been introduced for foreign companies providing global cloud services through Indian data centres, extending to 2047, alongside safe harbour margins for Indian service providers. These measures are intended to encourage sustained capital investment, support data localisation objectives and position India as a global hub for digital and cloud-based services.
In addition, the Budget includes a series of tax and procedural reforms aimed at improving the ease of doing business. These include rationalisation of tax provisions, reduced pre-deposit requirements for disputed taxes, expansion of safe harbour regimes for IT services, extensions to incentives for International Financial Services Centres, and measures designed to reduce litigation and enhance predictability for multinational groups operating in India.
The overall theme of the Budget is continuity of India's recent economic agenda, with a clear focus on structural reforms aimed at supporting more domestic and international business investment.
India–US Interim Trade Arrangement
Topping off this broader policy reset is the India interim trade arrangement that India has struck with the US. The deal was aimed at reducing the sharp tariffs introduced by the US on India in recent months, whilst still allowing India to retain protections for sensitive industries. The sands on the precise wording of the deal have shifted in recent days, with some cracks appearing on the level of commitment to reducing barriers on key sectors such as agriculture and digital services. However, for now both countries appear set on moving towards reduced trading friction in line with India's approaches with other market blocks.
DWF is a leading legal adviser to Indian and India-focused companies, financial institutions and high net worth individuals and families. Our India Group, consisting of 115 lawyers from 9 countries, 16 practice areas and 9 sector groups, is the largest India group of any international law firm located outside India.
Dhruv Chhatralia BEM, the Head of the DWF India Group, was named to the India Business Law Journal’s International A-List 2024 featuring the world’s top-tier international lawyers outside India, based on recommendations by general counsels and lawyers at Indian law firms, for his work on cross-border aspects of India-related matters. DWF was also shortlisted for the award of “Legal Practice of the Year” at the 6th Annual UK-India Awards in 2024 based on the achievements of the DWF India Group. Further details about the DWF India Group can be found on the following webpage: https://dwfgroup.com/en/services/india-group.
We would like to thank Fortune Elenwa and Surya Kumaravel for their contributions to this article.
