In-Depth Analysis of the India-EU Free Trade Agreement: Industry Opportunities and Investment Value Assessment

The India-European Union Free Trade Agreement (FTA) has undergone nearly 20 years of negotiations and has now entered the final signing stage. According to official sources, the agreement is expected to be formally signed on

, when European Commission President Ursula von der Leyen and European Council President António Costa will visit New Delhi to attend the signing ceremony [1][2].

This agreement covers

, and negotiations on 20 core chapters have now been completed, covering areas such as goods trade, services trade, investment protection, intellectual property rights, and sustainable development [3]. The agreement is expected to eliminate or reduce tariffs on of traded goods, establishing one of the world’s largest free trade areas covering 1.4 billion people in India and 450 million people in the EU [4].

In the 2024-25 fiscal year, India’s bilateral goods trade with the EU reached

(India’s exports: US$75.85 billion, imports: US$60.68 billion), making the EU India’s largest goods trading partner [5]. The total bilateral goods and services trade exceeded in 2025 [6].

The Indian pharmaceuticals industry will be one of the biggest beneficiaries of the India-EU FTA. Currently, Indian pharmaceutical exports face tariffs of approximately

in the EU; after the agreement is signed, these tariffs will be significantly reduced or even eliminated, significantly enhancing the competitiveness of Indian pharmaceutical companies in the EU market [7].

• Generic Drugs
• Active Pharmaceutical Ingredients (API)
• Biologicals
• Vaccines

Company	Market Capitalization (USD)	Core Advantages
Sun Pharmaceutical	387 billion	World’s largest generic drug manufacturer, well-established European market presence
Divi’s Laboratories	169 billion	India’s largest API manufacturer, 70% of revenue from exports
Cipla	123 billion	Leader in respiratory and anti-AIDS drugs
Dr. Reddy’s Laboratories	105 billion	Top 6 global generic drug manufacturer, fully EU-certified
Lupin	Top 10 in industry	Specialized generic drugs and biosimilars

The Indian pharmaceutical market is expected to grow from

in 2025 to in 2030, with a compound annual growth rate (CAGR) of 5.92% [8]. The oncology segment is growing the fastest, with an expected CAGR of 7.10% from 2025 to 2030.

IT services are another pillar industry of India’s exports to the EU. The agreement will promote export growth for India in the following areas:

• Business services
• Telecommunications and IT services
• Transportation services
• Fintech services

Company	Share of European Business	Q3 FY2026 Performance Highlights
TCS	32.8% of revenue from Europe (17.5% from UK + 15.3% from continental Europe)	1.4% quarter-on-quarter growth in the European market [9]
Infosys	Key revenue source from Europe	Exceeded expectations for two consecutive quarters
Wipro	Significant growth in European business	2.7% quarter-on-quarter growth in Europe in Q3 FY26 [10]

Indian IT companies will benefit from the agreement in the following ways:

1. Improved Market Access
   - Reduced barriers to services trade
2. Facilitated Data Flows
   - Simplified digital trade provisions
3. Enhanced Intellectual Property Protection
   - Better protection for innovative outcomes
4. Regulatory Coordination
   - Reduced compliance costs

The automobile industry is a relatively sensitive area in the agreement negotiations. India’s auto parts exports to the EU face tariffs of approximately

, which the agreement will significantly reduce [11].

• Auto parts (engine components, transmissions, brake systems)
• Two-wheelers and three-wheelers
• Electric vehicles (precedent set by the India-UK FTA)

Company	Market Capitalization (USD)	Business Highlights
Tata Motors	125 billion	Passenger vehicles, commercial vehicles, electric SUVs
Mahindra & Mahindra	Top-tier in industry	Off-road vehicles, electric SUVs
Ashok Leyland	Leading commercial vehicle manufacturer	Commercial vehicle exports
Bajaj Auto	Leading two-wheeler manufacturer	Exports account for over 45% of revenue

The CEO of BMW India recently warned that the agreement could allow Chinese electric vehicle companies to enter the Indian market through a “backdoor” via European factories, weakening domestic investment protection [12]. This reminds investors to pay close attention to the specific details of rules of origin and investment protection clauses in the agreement.

The textile industry is labor-intensive, and the agreement will help India narrow the competitive gap with countries like Bangladesh and Vietnam. Currently, Indian textile exports face EU tariffs of

, while the aforementioned countries enjoy preferential access [13].

• Garments
• Leather products
• Home textiles
• Yarn and fabrics

• Cotton textile industry
• Silk industry
• Man-made fiber products
• Leather products

GTRI analysis points out that the textile industry is a “clear beneficiary” of the FTA, and tariff elimination will bring

[14].

Indian steel exports face potential impacts from the EU’s Carbon Border Adjustment Mechanism (CBAM), but India is seeking relevant exemptions or preferential arrangements during the agreement negotiations [15].

• Approximately US$8 billion in exports in the 2024-25 fiscal year
• Major products: Hot-rolled coils, steel plates, special steel

• Tata Steel
• JSW Steel
• Steel Authority of India (SAIL)

The Carbon Border Adjustment Mechanism (CBAM) will take effect on January 1, 2026, covering industries such as steel, cement, aluminum, fertilizers, electricity, and hydrogen [16]. India is striving to obtain more favorable carbon tax treatment arrangements in the agreement.

India is a major exporter of petroleum products, and petrochemical products are an important component of India’s exports to the EU.

• Petroleum refining products
• Organic chemicals
• Plastics and plastic products
• Fertilizers

• Reliance Industries - US$1.886 trillion market capitalization, India’s largest enterprise [17]
• Bharat Petroleum
• Indian Oil Corporation

The agreement will also bring huge opportunities for EU enterprises, as India’s

will be significantly reduced.

• Aircraft and aircraft parts
• Electrical machinery
• Unprocessed diamonds
• Chemicals
• Pharmaceuticals
• Plastic products
• Luxury automobiles

Currently, approximately

operate in India, and cumulative EU direct investment in India has reached approximately [18].

1. High-end Manufacturing
   - German machinery, Italian luxury goods
2. Automobiles
   - Mercedes-Benz, BMW, Volkswagen
3. Chemicals
   - BASF, Linde, Bayer
4. Pharmaceuticals
   - Novartis, Roche, Sanofi
5. Financial Services
   - HSBC, Standard Chartered, Deutsche Bank

As of January 20, 2026, the performance of major Indian indices is as follows:

Index	Closing Level	Year-to-Date
Nifty 50	25,232.50	-3.50%
Sensex	82,180.47	-3.51%

The recent index adjustment reflects the market’s

for the trade agreement’s signing, as well as risk aversion brought by uncertainties in US tariff policies.

Industry	Investment Rating	Rationale
Pharmaceuticals	Strong Buy	Tariff reduction + exchange rate advantage + global aging demand
IT Services	Buy	Digital transformation + facilitated services trade
Auto Parts	Buy	Cost advantage + supply chain integration opportunities
Textiles	Hold with Caution	Fierce competition, depends on tariff reduction intensity
Steel	Neutral	High uncertainty regarding CBAM

• Sun Pharma (SUNPHARMA.BO)
  : Current price: US$1612, market capitalization: US$387 billion, P/E ratio: 37.05x. A short-term correction (7.63% decline in the past month) provides an entry opportunity [19].
• Dr. Reddy’s (DRREDDY.BO)
  : US$105 billion market capitalization, high share of revenue from the EU market.
• Divi’s Labs (DIVISLAB.BO)
  : Leading API manufacturer, 70% of revenue from exports.

• TCS (TCS.NS)
  : ₹3102.30, 32.8% of revenue from Europe, Q3 FY26 EPS exceeded expectations by 3.18% [20].
• Infosys (INFY.NS)
  : ₹1658.90, market capitalization: ₹689 billion, P/E ratio: 23.68x, reasonable valuation [21].

• Tata Motors (TATAMOTORS.BO)
  : ₹338.20, share price has recently come under pressure (56.32% decline in the past year), but its electrification transformation is worth watching [22].

1. Uncertainty in Agreement Signing
   : Despite optimistic expectations, final terms may still change
2. Carbon Border Adjustment Mechanism (CBAM)
   : Indian steel and chemical industries may face additional costs
3. Rules of Origin
   : Need to pay attention to whether the agreement includes strict clauses to prevent “transshipment”
4. Impact of Global Trade Wars
   : Uncertainties in US tariff policies may affect the agreement’s effectiveness
5. Implementation Timeline
   : Tariff reductions are usually phased in, so short-term performance contributions will be limited

• Focus on high-certainty beneficiary targets
  : Sun Pharma, TCS, Infosys
• Accumulate on dips
  : Use recent market corrections to build positions
• Focus on earnings expectations
  : Around the Q3 FY26 earnings season (late January - February)

• Hold leading enterprises in beneficial industries
  : Wait for the specific terms of the agreement to be finalized
• Pay attention to M&A opportunities
  : Industry integration may occur
• Monitor European enterprise collaborations
  : India-EU joint ventures may increase

• Strategic allocation to the Indian market
  : Diversify risks through ETFs (e.g., Nifty 50 ETF)
• Focus on supply chain restructuring
  : Opportunities brought by deepened India-EU supply chain cooperation
• ESG investment opportunities
  : Cooperation in green technology and renewable energy fields

The signing of the India-EU Free Trade Agreement will be a major milestone in India’s trade strategy, and is expected to bring significant growth opportunities for the following industries:

1. Pharmaceuticals Industry
   - Biggest beneficiary, tariff reduction + cost advantage
2. IT Services
   - Accelerated digital transformation, improved EU market access
3. Auto Parts
   - Enhanced cost competitiveness, supply chain integration
4. Textile and Apparel
   - Restored competitiveness, challenging Bangladesh and Vietnam
5. Petrochemicals
   - Indian refined petroleum product exports to Europe

For investors, the current market correction period provides an opportunity to

. It is recommended to focus on targets with the following characteristics:

• High share of revenue from EU operations
• Export-oriented business model
• Industry leading enterprises
• Growth companies with reasonable valuations

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[1] SteelOrbis - “India and EU Expected to Sign Free Trade Agreement on January 27” (https://cn.steelorbis.com/hang-ye-dong-tai/hang-ye-dong-tai/yinduheoumengyujijiangyu1-yue27-riqianshuziyoumaoyixie-1430224.htm)

[2] Times of India - “India-EU FTA talks: Piyush Goyal to visit Brussels this week” (https://timesofindia.indiatimes.com/business/india-business/india-eu-fta-talks-piyush-goyal-to-visit-brussels-this-week-talks-enter-final-phase/articleshow/126336684.cms)

[3] India Briefing - “India-EU Trade Deal Set for January 27, 2026: What’s Included” (https://www.india-briefing.com/news/india-eu-fta-signing-january-2026-41926.html)

[4] EGIC - “India-EU Relations: A Milestone Trade Deal” (https://egic.info/analyse/india-eu-relations-a-milestone-trade-deal)

[5] EU-India Trade Council - “Soon an India-EU FTA? Why is the trade deal important and which sectors will it benefit?” (https://eu-india.org/2026/01/14/soon-an-india-eu-fta-why-is-the-trade-deal-important-and-which-sectors-will-it-benefit-explain)

[6] Times of India - “India-EU FTA nears completion” (https://timesofindia.indiatimes.com/business/india-business/india-eu-fta-nears-completion-how-mother-of-all-trade-deals-can-offer-gains-amid-trumps-tariff-uncertainty-explained/articleshow/126694606.cms)

[7] The Hindu Business Line - “FTA with the EU to help boost India’s exports to the 27-nation bloc” (https://www.thehindubusinessline.com/economy/fta-with-the-eu-to-help-boost-indias-exports-to-the-27-nation-bloc/article70504886.ece)

[8] Mordor Intelligence - “Indian Pharmaceutical Industry - Overview & Growth 2031” (https://www.mordorintelligence.com/industry-reports/pharmaceuticals-industry-in-india)

[9] TCS - “TCS Financial Results Q2 FY 2026” (https://www.tcs.com/who-we-are/newsroom/press-release/tcs-financial-results-q2-fy-2026)

[10] Business Standard - “Wipro - Slow deal ramp-up” (https://bsmedia.business-standard.com/_media/bs/data/market-reports/equity-brokertips/2026-01/17688119370.32501300.pdf)

[11] Deloitte - “India economic outlook, January 2026” (https://www.deloitte.com/us/en/insights/topics/economy/asia-pacific/india-economic-outlook.html)

[12] Economic Times - “As EU trade deal nears finishing line, BMW warns of backdoor entry for Chinese carmakers into India” (https://m.economictimes.com/industry/auto/auto-news/as-eu-trade-deal-nears-finishing-line-bmw-warns-of-backdoor-entry-for-chinese-carmakers-into-india/articleshow/126499212.cms)

[13] Cartoq - “BMW India Chief Warns Of Chinese EV Makers Using EU FTA As Backdoor Entry Route” (https://www.cartoq.com/car-news/bmw-warns-chinese-ev-threat-eu-route-india-eu-trade-deal/)

[14] Guancha.cn - “Negotiated for 25 Years, Finally Signed” (https://www.guancha.cn/internation/2026_01_18_804221.shtml)

[15] Nhan Dan Online - “Free Trade Agreements (FTAs): The ‘Shield’ of the World Economy” (https://cn.nhandan.vn/article-post148516.html)

[16] Official Statement from India’s Ministry of Commerce (Press Conference by Indian Government Officials on January 19, 2026)

[17] Jinling API Data - Company Profile [0]

[18] India Briefing - FDI inflows data (https://www.india-briefing.com/news/india-eu-fta-signing-january-2026-41926.html)

[19] Jinling API Data - Sun Pharmaceutical (SUNPHARMA.BO) [0]

[20] Jinling API Data - Tata Consultancy Services (TCS.NS) [0]

[21] Jinling API Data - Infosys (INFY.NS) [0]

[22] Jinling API Data - Tata Motors (TATAMOTORS.BO) [0]