India and the European Union have concluded a long-delayed Free Trade Agreement (FTA), a major step expected to reshape bilateral trade flows, including steel, though Europe’s carbon border regime will continue to limit export upside for Indian mills.
Under the agreement, tariffs will be eliminated or reduced on 96.6pct of goods traded by value. The EU will cut tariffs on 99.5pct of imports from India over a seven-year period, including base metals, chemicals and other industrial products, according to India’s trade ministry. The European Commission estimates the deal will double EU exports to India by 2032 and save European companies around EUR 4 bln (USD 4.77 bln) annually in duties.
For steel, India will be allowed to export 1.6 mln tons per year to the EU on a duty-free basis, roughly half of its current annual shipments of 3-4 mln tons. New Delhi is seeking an expansion of this quota, with discussions expected to conclude by June 30, ahead of EU trade rule changes effective July 1.
The agreement does not provide any exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM), which began implementation at the start of this year and applies to steel and other carbon-intensive products. While CBAM costs will initially cover only a limited share of embedded emissions, the levy will be gradually phased in, raising compliance costs for Indian steel exporters.
The EU has agreed to provide EUR 500 mln (USD 597 mln) in support to help India reduce emissions, potentially aiding decarbonization efforts in energy-intensive sectors such as steel. However, only countries linked to the EU emissions trading system, including Switzerland and Norway, are currently exempt from CBAM, and India remains outside this framework.
The FTA is undergoing legal vetting and technical review, a process expected to take five to six months. Officials expect the agreement to enter into force during 2026, with full implementation possibly extending into early 2027.
The deal covers a combined market of nearly USD 27 trillion, representing about 25pct of global GDP. India currently holds a trade surplus of more than USD 15 bln with the EU, exporting USD 75.85 bln worth of goods compared with imports of USD 60.68 bln.
1 USD / 0.83 EUR
