The India–EU FTA: Business growth, wrapped in complexity

Quick Reality Check

Here are some essentials, without the usual optimism:

• India will reduce tariffs on 96% of EU goods, and the EU will eliminate tariffs on 99% of Indian exports over seven years
• India will cut car import duties from 110% to 10%, dramatically shifting automotive economics
• India receives preferential access across 97% of EU tariff lines, boosting traditional export sectors
• Both sides have also signed a Security & Defence Partnership

All of this is transformative, but not easy.

Opportunity doesn’t automatically translate into success

Both the EU and India are fragmented markets, but for very different reasons:

Europe’s fragmentation

27 countries, each with its own regulatory frameworks, tax codes, languages, consumer expectations, labor laws, and political cycles. Even with an EU framework, businesses still face very different realities in, say, Poland, Germany, Spain, or Denmark.

India’s fragmentation

India is a continental system shaped by linguistic, cultural, political, and economic polarization, with states holding significant regulatory autonomy. Doing business in Tamil Nadu feels nothing like doing business in Uttar Pradesh or Maharashtra.

Same problem, different mechanisms. And the FTA doesn’t magically erase any of this.

European companies entering India

Many EU firms are accelerating India strategies given tariff reductions:

• Stellantis, the European automotive giant, publicly framed the deal as a “landmark” that will accelerate its Make in India for the World expansion

But even for Stellantis, India is not a uniform market. Automotive demand varies hugely by state, urban vs rural divide is stark, financing ecosystems differ, and infrastructure varies widely.

Indian companies looking toward Europe

The FTA significantly improves long‑term access for India’s major export categories. But Indian exporters face European fragmentation, complex compliance requirements, ESG obligations, and stricter product standards than most other markets.

Many Indian manufacturers that have recently expanded into Europe (e.g., in textiles and engineering goods) are now discovering that selling across Germany, the Nordics, France, and the Balkans means building multiple parallel commercialization models, not one.

Businesses should not underestimate

Here’s the uncomfortable but necessary truth:
Both sides are stepping into markets that are far more complex than tariff charts suggest. Business growth will require pro-active mitigation of several issues.

1. Tariffs drop, but regulatory barriers remain high

Product standards, environmental norms, data rules, and labor requirements vary widely between EU countries. And India’s own regulatory frameworks shift frequently across states.

2. Supply chain shifts

The agreement incentivizes European manufacturers to move activity to India.
But supply chain relocation requires:

• Land acquisition
• Local vendor development
• Skilled labor availability
• Compliance with rules‑of‑origin
• Long lead times in capex decisions

Even the most optimistic projections show multi‑year timelines. None of this is plug‑and‑play.

3. Pricing benefits will be competed away

If tariffs drop from 110% to 10% on EU cars, for example, prices will fall. But so will margins as competition heats up.

4. Fragmented distribution networks

Both India and Europe require companies to build multi‑node, region‑specific distribution ecosystems.
Winning in Northern Europe doesn’t mean winning in Southern Europe.
Winning in South India doesn’t guarantee success in the North.

5. Political and geopolitical risks remain

The entire FTA was accelerated partly because of U.S. tariff pressures on both India and the EU. Political shifts can just as easily modify or slow down implementation.

6. Compliance as cost driver

Rules‑of‑origin, sustainability requirements, digital compliance frameworks, and ESG thresholds will require many firms to overhaul existing systems.

For many mid‑sized companies, compliance burden will be the biggest bottleneck.

The FTA opens the door, the rest is up to you

The India-EU FTA is historic, but it’s not a golden ticket.
It is an opportunity wrapped in complexity, and the winners will be the ones who prepare realistically, not optimistically.

If your organization wants to make sense of this deal, not in theory, but in practical execution, XBV can help you navigate the fragmentation, compliance, supply chain redesign, and strategic planning required to actually win in this new landscape.