India–EU FTA impact: Winners and losers across key sectors
- 30th January 2026
- 03:00 PM
- 5 min read
Summary
India and the European Union have concluded a long-pending free trade agreement, setting in motion one of the most significant changes to India’s external trade framework in recent years. While the economic impact will play out over time, the deal is expected to reshape export competitiveness across key sectors, forcing investors to reassess medium-term opportunities and risks.Mumbai | January 30
After nearly two decades of intermittent negotiations, India and the European Union have finalised a comprehensive free trade agreement, marking an important shift in India’s external trade framework. The deal comes at a time when global supply chains are being reconfigured amid geopolitical tensions and uncertainty around US trade policy.
Together, India and the EU account for roughly 25% of global GDP and about one-third of global trade. The pact aims to liberalise tariffs across 90–95% of traded goods, with immediate zero-duty access on a majority of EU tariff lines and phased reductions on others.
While implementation is expected from 2026–27, market participants see the deal as a structural re-rating driver rather than a near-term trading trigger for export oriented sectors.
Why the India–EU deal matters for Indian markets
The EU already absorbs nearly 18% of India’s total exports, making it one of India’s largest and most stable trading partners. Analysts see the FTA as a strategic hedge against external shocks, offering Indian exporters deeper access to a large, high-value market through tariff rationalisation, harmonised standards and reduced non-tariff barriers.
Over time, the agreement is expected to support export-led growth, deeper India–EU industrial partnerships and greater integration of Indian companies into European supply chains.
Textiles and apparel: Key beneficiaries
Textiles and apparel are widely seen as the clearest winners of the FTA.
The EU currently levies tariffs of 10–12% on several Indian garment categories, eroding competitiveness versus zero-duty exporters such as Bangladesh and Vietnam. With tariffs set to be eliminated over time, Indian exporters are expected to regain pricing parity across knitwear, outerwear and home textiles.
India’s textile exports to the EU are estimated at $7–7.5 billion, compared with an EU import market exceeding $250 billion, leaving ample headroom for market share gains.
Listed players with meaningful EU exposure include KPR Mill, Welspun Living, Gokaldas Exports, Indo Count Industries, Vardhman Textiles and Trident.
Pharmaceuticals and APIs: Regulation is the key
In pharmaceuticals, the key opportunity lies less in tariff cuts and more in regulatory cooperation.
Indian companies currently account for just over 2% of the EU’s pharma imports, constrained by lengthy approval timelines and high compliance costs. A more predictable and harmonised regulatory framework could allow Indian generics, APIs and biosimilar players to scale EU dossiers, win more tenders and diversify beyond the US market.
Stocks in focus include Dr Reddy’s Laboratories, Sun Pharma, Aurobindo Pharma, Laurus Labs, Divi’s Laboratories, Zydus Lifesciences and Biocon.
Chemicals: Gaining from Europe’s supply constraints
Chemicals and specialty chemicals are another structural beneficiary.
European producers continue to grapple with elevated energy costs and tighter environmental norms, increasing outsourcing to lower-cost regions. India exported close to $9 billion worth of chemicals to the EU in 2024, and tariff liberalisation could further deepen these trade links.
Key names include SRF, Navin Fluorine, Gujarat Fluorochemicals, Jubilant Ingrevia, Vinati Organics and Privi Speciality.
Capital goods and defence: A major long-term opportunity
Beyond traditional export sectors, the FTA could prove strategically important for capital goods and defence, particularly through preferential market access and deeper India–EU industrial cooperation.
Engineering goods currently face EU tariffs of up to 22%, limiting competitiveness against FTA-linked suppliers. Preferential access under the agreement could help Indian exporters win incremental orders in the EU’s engineering import market, estimated at over ₹170 trillion, compared with India’s current exports of around ₹1.4 trillion.
Companies with established EU exposure or export-ready platforms are better positioned to benefit, including Apar Industries, Elgi Equipments, Carborundum Universal, Thermax, Siemens Energy India, GE Vernova T&D India, CG Power, Hitachi Energy and Triveni Turbines.
On defence, closer India–EU cooperation aligns India’s Aatmanirbhar Bharat push with Europe’s focus on supply-chain diversification and strategic autonomy. Indian defence manufacturers could gain access to new markets and joint manufacturing opportunities, particularly as Europe looks to de-risk defence procurement.
Defence names that could see incremental opportunities include Bharat Electronics, Solar Industries, Mazagon Dock Shipbuilders, Cochin Shipyard, Garden Reach Shipbuilders and Data Patterns.
Autos and alcobev: Where competition could intensify
Not all sectors stand to gain.
In autos, tariff cuts on EU vehicle imports – from 110% to about 10% under a quota framework – could raise competitive pressure on domestic manufacturers. Stocks such as Maruti Suzuki, Mahindra & Mahindra and Tata Motors have already seen volatility, though analysts view this as a competitive risk rather than a structural threat.
In alcobev, lower duties on European wines and spirits could weigh on domestic premium brands such as Radico Khaitan, Piccadilly Agro and Sula Vineyards, particularly in the near term.
Bottom line
The India–EU free trade agreement is best seen as a multi-year structural shift, not a short-term earnings catalyst. For investors, selective exposure to export-oriented sectors – particularly textiles, pharmaceuticals, chemicals, capital goods and defence – may offer the most durable opportunities, while caution is warranted in segments facing higher import competition.
For more updates on markets follow PL Capital.
