The proposed India-European Union Free Trade Agreement (FTA) could create export opportunities worth USD 10-11 billion for India by helping exporters diversify beyond the US market, according to the latest Rubix Country Insights – European Union 2026 report.
The report said the EU offers significant potential for Indian exporters, particularly at a time when higher US tariffs are prompting businesses to explore alternative markets. It noted that while India's top 15 export products to the US accounted for nearly USD 45 billion, or around 52 per cent of total exports to the country in FY2025, many of these product categories remain underrepresented in the EU market, creating substantial room for expansion.
Export Diversification to Reduce US Dependence
According to Rubix, excluding telecom equipment, pharmaceutical formulations and petroleum products, the remaining 12 major product categories exported to the US currently have a relatively small presence in the European market.
These products generated exports worth nearly USD 21 billion to the US during FY2025. If India is able to redirect even 50 per cent of this trade towards the EU over time, it could generate additional export opportunities of USD 10-11 billion, partially offsetting risks arising from changing US trade policies.
The report identifies sectors such as cut diamonds, jewellery, auto components, seafood, home textiles, semiconductor devices, electrical transformers, women's apparel, furnishing articles, agrochemicals and T-shirts as key categories with untapped export potential in the EU.
Textile Sector Poised to Gain
The report highlighted that India's exports to the EU are led by mineral fuels (20 per cent), followed by electrical machinery (15 per cent), organic chemicals (7 per cent) and machinery and equipment (7 per cent). Other important export categories include pharmaceuticals, iron and steel, precious stones and textiles.
However, Indian textile exports currently face import tariffs of 12-16 per cent in the EU, reducing their competitiveness against countries such as Bangladesh and Vietnam that enjoy preferential market access.
Rubix said the proposed India-EU FTA could eliminate or significantly reduce these duties, making Indian textile products more price competitive and helping exporters expand their market share across Europe.
Complementary Trade Relationship
The report described India and the EU as highly complementary trading partners.
India primarily exports energy products, pharmaceuticals and manufactured goods, while importing advanced machinery, electrical equipment, aircraft, optical instruments and other technology-intensive products from Europe. Machinery and equipment account for 21 per cent of India's imports from the EU, followed by electrical machinery at 15 per cent, aircraft and spacecraft at 10 per cent, and optical instruments at 6 per cent.
EU Expanding Global Trade Network
Rubix noted that the EU continues to strengthen its position as the world's largest trading bloc through an expanding network of free trade agreements.
The bloc currently has 44 preferential trade agreements covering 76 countries, supporting more than 630,000 European exporters and generating annual customs duty savings of around EUR 24 billion. Besides India, the EU has recently concluded or advanced trade negotiations with Mercosur, Indonesia, Singapore, the UAE, Thailand, the Philippines, Malaysia, Ukraine and Australia, reflecting its broader strategy to diversify trade partnerships amid geopolitical and economic uncertainties.
EU Economy Expected to Grow Moderately
The report forecasts the European Union's economy to grow by 1.4 per cent in 2026 and 1.6 per cent in 2027, supported primarily by domestic consumption despite weaker external demand and ongoing geopolitical risks.
Rubix also expects the soon-to-be concluded India-EU FTA to support export growth from 2027 onwards, although it cautioned that potential additional US tariffs on certain EU member states could weigh on the region's trade outlook. |
