India-EU trade deal could add €119 billion by 2035. Can Indian exporters seize the opportunity?

India’s free trade agreement (FTA) with the European Union could generate up to €119 billion in additional trade by 2035. For Indian exporters, the agreement offers an opportunity to enter new markets, compete with established suppliers and become a bigger part of European manufacturing and supply chains.

Indian manufacturers will have to demonstrate that they can meet European quality standards, maintain consistent production, deliver on time and comply with increasingly demanding environmental and sustainability requirements. For smaller exporters, the cost of certification, testing and documentation could determine whether they can take advantage of the agreement.

“The biggest challenge is turning a price advantage into a supplier relationship,” Robin Sukhia, Secretary General and CEO of the Sweden-India Business Council (SIBC), told Firstpost in an emailed response.

“European buyers do not select suppliers on tariffs alone. They need confidence that a supplier can meet technical specifications, maintain consistent quality, deliver on time and sustain production at the required scale,” he said.

What does the €119 billion estimate mean?

The €119 billion estimate comes from a May 2026 report by the Confederation of Swedish Enterprise, prepared in collaboration with the Confederation of Indian Industry (CII).

The report estimates that the agreement could generate up to €119 billion in additional EU-India trade by 2035 compared with a scenario in which the two sides do not have the agreement. This is additional trade over and above the growth expected as both economies expand.

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According to Sukhia, up to €71 billion of the additional trade could come from higher European exports to India, while Indian exports to the EU could increase by €48 billion.

The projected gains are not evenly distributed. European businesses could capture a larger increase in exports as India reduces tariffs on a range of industrial products, machinery, chemicals and other goods.

The report estimates that India’s GDP could increase by up to €72 billion by 2035 compared with the no-agreement scenario. The corresponding increase for the EU is estimated at around €45 billion.

Textiles, footwear and marine products among biggest opportunities

The strongest immediate opportunities for Indian exporters are likely to emerge in labour-intensive industries, where the country already has an established manufacturing and export base.

These include textiles and apparel, leather and footwear, marine products, gems and jewellery, toys and sports goods.

According to the Indian government’s January 2026 FTA factsheet, Indian exports worth around $33.5 billion in labour-intensive categories currently face European import duties ranging from 4 per cent to 26 per cent.

The agreement provides immediate duty elimination for 70.4 per cent of the EU’s tariff lines covering 90.7 per cent of India’s export value. Another 20.3 per cent of tariff lines, covering 2.9 per cent of India’s exports, will receive zero-duty access over three or five years.

The government expects these concessions to improve the competitiveness of Indian products in the European market.

Textiles and apparel are among the clearest beneficiaries. European duties on these products currently reach 12 per cent. The agreement provides for immediate elimination across the relevant tariff lines.

Leather and footwear products, which face duties of up to 17 per cent, will also receive immediate duty-free access. The same applies to toys and sports goods, while most gems and jewellery tariff lines will receive immediate elimination.

Marine products offer another significant opportunity. Some Indian seafood exports currently face European duties of up to 26 per cent. While most marine product tariff lines receive immediate duty elimination, certain products will receive concessions over a phased period or through tariff-rate quotas.

Engineering goods, chemicals, electrical equipment and automotive components could also benefit from closer industrial cooperation.

India already exports machinery, chemicals, textiles, metals and petroleum products to the EU. The agreement could help manufacturers expand these exports and develop new relationships with European buyers.

Sukhia said India’s strongest opportunities lie in sectors where it already has an industrial base, established suppliers and the ability to scale production.

“Automotive components, industrial machinery, electrical equipment, textiles and clothing, chemicals and selected engineering products are well placed to benefit from improved market access,” he said.

He also identified opportunities in electronics, electrical equipment and industrial engineering, particularly where Swedish companies already have manufacturing and research operations in India.

Why lower tariffs may not be enough for Indian exporters

The biggest challenge for Indian businesses could emerge after the agreement enters into force.

European buyers typically assess suppliers on more than price. They look at manufacturing capacity, technical specifications, quality assurance, delivery schedules, traceability and the ability to maintain consistent production.

An Indian manufacturer may become more competitive because of lower tariffs, but that advantage could disappear if it cannot meet a buyer’s technical or commercial requirements.

For smaller businesses, the costs of entering the European market could be particularly challenging.

Exporters may have to invest in testing, certification, quality-control systems, documentation and production upgrades. They must also understand the agreement’s rules of origin, which determine whether a product qualifies for preferential tariff treatment.

A product manufactured in India does not automatically qualify for lower duties simply because it is exported from the country. It must satisfy the relevant product-specific rules governing domestic value addition, processing or the origin of inputs.

Sukhia said Indian companies should begin by identifying which products stand to gain a meaningful tariff advantage and which European buyers purchase those products.

“Approaching prospective buyers before the agreement enters into force can help them understand procurement requirements, obtain feedback and begin supplier qualification in advance,” he said.

He also said businesses should review production capacity, quality assurance, traceability, documentation and delivery performance.

India’s Ambassador to Sweden, Anurag Bhushan, told Firstpost in an emailed response that the challenge for Indian MSMEs is often not market access but market readiness.

“Successfully entering European markets requires compliance with technical standards, certification requirements, sustainability norms, supply-chain traceability and customer expectations,” he said.

India and Sweden have already identified MSME cooperation as an important part of their economic partnership. The two countries are working towards an India-Sweden SME and Startup Platform to facilitate business partnerships, knowledge-sharing and engagement between their innovation ecosystems.

Bhushan also pointed to a proposed Trade Facilitation Mechanism to help businesses address practical challenges involving regulatory requirements and market access.

At the operational level, he said, support should focus on easier access to accredited testing and certification facilities, greater awareness of European regulations, assistance with quality improvements and stronger business-to-business networking.

Rather than setting numerical targets for new exporters, he said the success of the agreement should be measured through outcomes such as more MSMEs obtaining internationally recognised certifications, joining global value chains and securing repeat business.

Carbon costs could complicate India’s European export ambitions

The Carbon Border Adjustment Mechanism (CBAM), which puts a carbon-related cost on certain imported products, is particularly relevant for energy-intensive industries such as steel, aluminium, cement and fertilisers.

India has secured additional preferential access for steel exports under the FTA. But the arrangement does not exempt Indian steelmakers from the EU’s carbon-related requirements.

A September 2026 Reuters report said the agreement would provide India with an additional preferential steel quota of around 694,853 tonnes annually, taking the combined quota under the new arrangement and existing World Trade Organization provisions to approximately 1.64 million tonnes.

That compares with India’s steel exports of around 2.4 million tonnes to the EU in 2025.

However, the quota does not remove the carbon compliance burden. Steel shipments outside the preferential quota will also remain subject to the applicable EU trade measures.

For Indian steelmakers, this means the benefits of better market access will depend partly on their ability to reduce emissions and provide credible emissions data.

The issue goes beyond steel. European buyers are increasingly evaluating the environmental footprint of their suppliers and the sustainability of their supply chains.

Sukhia said exporters in sectors covered by CBAM need to understand the applicable emissions reporting and cost requirements. Businesses dealing in products subject to sanitary and phytosanitary regulations must also ensure that they meet European requirements.

Swedish companies are looking to expand their India presence

The agreement could also encourage European companies to deepen their manufacturing and investment presence in India.

Sweden offers an indication of how businesses are viewing the opportunity.

According to Team Sweden’s 2026 Business Climate Survey, 213 Swedish companies operating in India were surveyed. Around 83 per cent expected their turnover to increase over the following 12 months, while 61 per cent planned to increase investments.

The survey also found that 73 per cent expected the India-EU FTA to have a positive impact on their businesses within two years of its entry into force.

These findings point to continued confidence in India as a manufacturing, sourcing and investment destination. But they should not be interpreted as confirmed investment commitments resulting from the FTA.

Sukhia said it was still too early to attribute individual investment decisions to the agreement. However, Swedish companies were continuing to expand their manufacturing, engineering and research and development capabilities in India.

He cited Epiroc’s manufacturing and research presence in Hyderabad and Nashik, Ericsson’s local production and research capabilities, Rosti’s contract manufacturing operations in Chennai and Sandvik’s plans to expand its Pune operations into an innovation hub.

He also pointed to Bulten’s agreement with the Tamil Nadu government for a micro-fastener manufacturing facility in Chennai, intended to serve European and US markets.

India and EU accelerate preparations for implementation

The agreement is moving through the formal approval process, with both sides working towards signing it before the end of 2026.

The European Commission submitted its proposals to the Council of the European Union in September for the signing and conclusion of the agreement. The legal review of the text has been completed, but the remaining approval and ratification procedures are necessary before it can enter into force.

On November 2, Commerce Secretary Rajesh Agrawal held discussions with senior European Commission officials in Brussels on market access, customs procedures and preparations for implementing the agreement.

The discussions focused on making customs processes more efficient, improving transparency and reducing transaction costs for businesses. The two sides also discussed supply-chain cooperation.

Commerce and Industry Minister Piyush Goyal said in October that the agreement was expected to be signed before the end of 2026 and could become operational within four to five months of signing.

This could place implementation in early 2027, although the actual date will depend on the completion of the required procedures.

Bhushan said India and the EU had completed the legal scrubbing of the agreement and were working towards signing it by the end of the year.

He urged businesses to use the intervening period to understand the agreement’s provisions, assess opportunities in their sectors and strengthen compliance with European technical, environmental and sustainability standards.

The real test will be repeat orders, not tariff announcements

The India-EU FTA provides a significant opening for Indian businesses looking to diversify export markets and become more deeply integrated into international supply chains.

It could improve the competitiveness of labour-intensive industries, encourage manufacturing partnerships and create new opportunities for Indian service providers.

But the projected €119 billion increase in trade will not materialise simply because duties are reduced.

European businesses will also gain from the agreement. They will have better access to India’s market, while Indian exporters will have to compete with suppliers from countries that already have established commercial relationships with European buyers.

For India, the next phase will require more than negotiating market access. It will involve improving manufacturing capabilities, reducing compliance costs, strengthening testing and certification infrastructure and helping MSMEs connect with international buyers.

The success of the agreement will ultimately depend on whether Indian businesses can move beyond occasional export orders and become reliable suppliers to European companies.

As Sukhia put it, the priority is to turn interest into informed commercial decisions and prepare businesses for implementation.