EU-India Free Trade Agreement: Strategic implications for Italian companies

January 27, 2026 marks a turning point in international economic relations: the European Union and India have officially concluded a Free Trade Agreement (FTA) during the EU-India summit held in New Delhi, in the presence of top European and Indian institutional authorities. The understanding represents a historical milestone In the bilateral relations between two areas that, collectively, host about A quarter of the world's population and generate over 25% of global GDP  

The EU-India agreement has been described by many observers as. “the mother of all agreements”, not only because of its economic significance, but also because of its geopolitical value in a global context increasingly characterized by protectionism, fragmentation of value chains, and growing competition between economic blocs. 

The details of the EU-India agreement

The agreement provides for a Unprecedented trade liberalization between the two areas. Specifically: 

• Over 90% of the goods traded between the EU and India will be gradually liberalized; 

• The agreement covers about the 99% of India's exports to the EU. and the 97% of European exports to India.; 

• A Significant reduction in customs tariffs, aiming to take the value of bilateral trade beyond the 136 billion dollars annually; 

• The’Market access for services and investment, accompanied by increased regulatory cooperation in strategic areas 

Alongside the trade dimension, the agreement includes chapters devoted to the mobility of skilled workers and students, at the cooperation in industry, at the security and defense and the integration of India into the european value chains. 

Significant sectoral impacts 

From an industrial point of view, the EU-India FTA introduces particularly relevant changes for several industries of interest to Italian companies as well: 

• Textile: Reduction of duties from 12% to 0%, with a complete removal of tariff barriers; 

• Leather and leather goods: duty reduced from 17% to 0%; 

• Gems and jewelry: duty reduced from 4% to 0%, facilitating access to European premium demand; 

• Electronics: reduced duty from 14% to 0%; 

• Chemicals: duty reduced from 12.8% to 0%; 

• Pharmaceutics: increased access to high value-added EU markets; 

• Engineering and machinery: strengthening industrial cooperation and expanding manufacturing presence 

While some sensitivities remain, particularly on sectors such as automotive and specific agricultural sectors, the agreement aims to strengthen manufacturing competitiveness, reducing market access costs and encouraging cross-investment. 

Strategic value for Italian enterprises

For Italian companies, and SMEs in particular, the EU-India agreement represents a medium to long term structural opportunity. Despite sustained growth in recent years (+90% of European exports to India over the past decade), the EU still represents only 2.5% of India's total imports, compared with 15% in China. This figure highlights wide margins for growth for European and Italian companies in particular. 

India is also confirmed as: 

• one of the fastest growing markets globally; 

• An increasingly relevant industrial hub for localized production; 

• A strategic partner for European supply chain diversification. 

As with all agreements of this magnitude, political signing is only the first step. L’entry into force of the agreement will require a technical and legislative phase during which implementation mechanisms, rules of origin, customs procedures and sectoral requirements will be defined in detail. In this context, enterprises that intend to reap the benefits of the agreement first will need to: 

• Analyze the tariff impact on their products; 

• Evaluate the adequacy of entry models in the Indian market; 

• Plan strategies for localization, partnership or direct investment; 

• Monitor regulatory and normative developments related to FTA. 

Risks and challenges to consider

Despite the opportunities, the agreement presents some criticality Italian companies need to take into consideration:

1. Regulatory complexity and protectionism: Although the agreement reduces many tariff barriers, there remain non-tariff barriers, as regulatory restrictions, health certifications and customs authorizations, which may require a lengthy adaptation process. Italian SMEs will have to navigate a complex regulatory landscape, especially in sensitive sectors such as agribusiness and health.

2. Dairy sector and other exclusions: The fact that the dairy sector was not included in the agreement is a major limitation for some Italian SMEs, particularly those that export cheese and milk. India's protectionist policies in this sector may continue to pose a challenge, requiring alternative solutions for market access.

3. Competition with other emerging countries: Although the EU-India agreement is a positive step for Italian SMEs, competition from other countries, such as the China and the United States, will remain high. India is a competitive market, and Italian companies will have to differentiate focusing on quality, innovation and sustainability to establish themselves.

4. Domestic political challenges in India: The political situation in India may be affected by changes in domestic policies, such as agricultural reforms and skilled labor management, factors that could alter the speed and effectiveness of agreement implementation.

Conclusions: The importance of strategic consulting

The EU-India Free Trade Agreement represents. one of the most important Trade policy instruments in recent decades and opens a new phase in economic relations between Europe and Asia. For Italian companies, the FTA constitutes a concrete strategic leverage to strengthen its presence in a complex but very high-potential market. 

However, the complexity of the agreement, the plurality of sectors involved, and the specifics of the Indian context make it structured and informed approach indispensable. In this scenario, the support of a specialized partner in internationalization, able to combine strategic analysis, operational expertise and local presence, becomes a key factor in turning a political agreement into a real competitive advantage.