The India-European Union Free Trade Agreement has been framed as a strategic masterstroke, a claim that India can still strike ambitious trade deals with advanced economies while protecting domestic interests. Look closer, however, and the agreement reveals a familiar hierarchy. Europe walks away with immediate, bankable gains in agriculture and food exports. India walks away with exclusions, safeguards and assurances. And hanging over the entire deal is a climate regime that threatens to claw back whatever competitiveness Indian exporters think they have won.
Agriculture is where this imbalance is most visible. For years, European negotiators had one overriding objective in talks with India: to crack open one of the world’s most protected food markets. India’s average applied agricultural tariffs exceed 36 per cent, and in many product categories, they are far higher. These tariffs have insulated domestic producers but also kept European food and beverage exports at the margins.
The FTA changes that equation decisively. India has agreed to eliminate or sharply reduce tariffs across a broad spectrum of EU agri-food exports. Olive oil and vegetable oils, earlier facing duties of up to 45 per cent, will come in duty-free. Fruit juices and non-alcoholic beer, taxed up to 55 per cent, will also enter at zero duty. Sheep and lamb meat moves from a 33 per cent tariff to full duty-free access. A long list of processed foods, including bread, biscuits, pasta, chocolate and pet food, will see tariffs of up to 50 per cent wiped out.
Alcohol, one of Europe’s most commercially and politically charged demands, sees a dramatic breakthrough. Wine tariffs of 150 per cent will be cut to 20 per cent for premium wines and 30 per cent for mid-range categories. Duties on spirits fall to 40 per cent from levels as high as 150 per cent. These changes are not cosmetic. They fundamentally alter the economics of selling European food and drink in India’s urban and semi-urban markets.
The European Commission estimates duty savings of up to €4 billion annually once the agreement is fully implemented. EU agri-food exports to India already support around 800,000 jobs across the bloc. With India’s middle class expanding and consumption patterns shifting, European farmers and food companies have secured what is arguably their most significant market-opening deal in Asia.
Contrast this with what the EU has offered Indian agriculture. The list of exclusions is long and telling. No tariff concessions on sugar and ethanol, rice and soft wheat, beef and poultry, milk powders, bananas or honey. Products where Indian exporters are competitive, such as table grapes and cucumbers, are subject to tightly controlled tariff-rate quotas that cap volumes and mute commercial impact.
Equally important is what has not changed. Europe’s sanitary and phytosanitary standards remain untouched. The FTA does not lower regulatory thresholds or ease compliance burdens. For Indian exporters, access to the EU market continues to depend on meeting some of the world’s most stringent food safety, traceability and environmental requirements. Cooperation mechanisms may improve dialogue, but they do not reduce costs or uncertainty.
India’s own agricultural gains are therefore modest and carefully fenced. Preferential access has been secured for tea, coffee, spices, gherkins, dried onions, table grapes, fresh fruits and vegetables, and selected processed foods. These are valuable niches, but they do not amount to a structural opening of the European market to Indian farmers. Agriculture remains a marginal component of India-EU trade, which reached $136.5 billion in goods in 2024-25.
To be fair, India had little choice but to defend its most sensitive sectors. Dairy, cereals, poultry, soymeal and several fruits and vegetables are excluded from liberalisation. India is the world’s largest milk producer, with more than 80 million households dependent on dairy. Any opening to subsidised European dairy would have been politically untenable and economically destabilising. Protection was non-negotiable.
But the cost of that defence is an agreement where India’s agriculture is protected rather than promoted. European farmers gain new markets; Indian farmers gain insulation from competition, but little new opportunity abroad. It is a trade-off that preserves the status quo rather than reshaping it.
This imbalance is compounded by a second, more insidious factor, climate policy. The EU’s Carbon Border Adjustment Mechanism sits outside the FTA but looms over it like a shadow tariff. From January 2026, imports into the EU will be taxed based on embedded carbon emissions. Initially covering steel, aluminium, cement, fertilisers, electricity and hydrogen, CBAM is explicitly designed to expand across industrial goods and, eventually, entire value chains.
The FTA does nothing to neutralise this risk. There is no exemption for Indian exports, no automatic credit for domestic climate efforts, no transitional relief. As a result, EU exports will increasingly enter India at low or zero tariffs under the FTA, while Indian exports will continue to face rising carbon-linked costs in Europe.
Trade analysts have warned that this creates a structural skew. Ajay Srivastava of the Global Trade Research Initiative has noted that while the deal locks in deep tariff cuts, its value is constrained by unresolved regulatory and climate issues. CBAM, he argues, front-loads tariff benefits while back-loading compliance costs, gradually eroding competitiveness as the regime expands.
The numbers underline the risk. India’s exports of steel, aluminium and related products to the EU run into tens of billions of dollars annually. Even modest carbon levies could wipe out the gains from tariff elimination. And the costs will not stop at heavy industry. Carbon accounting, reporting and verification requirements will increasingly affect agri-processing, chemicals and manufactured food exports as well.
The EU has offered cooperation platforms and spoken of up to €500 million in support for India’s green transition. These are useful, but they are not remedies. They do not offset the immediate and ongoing costs exporters will face. In effect, India has accepted a deal where tariff liberalisation is visible and immediate, while climate-linked trade barriers are deferred but inevitable.
Taken together, the agricultural concessions and the carbon blind spot reveal the real character of the India-EU FTA. It is a deal shaped less by symmetry than by leverage. Europe secured market access where it mattered most, protected its farmers where it needed to, and embedded its regulatory power for the future. India secured predictability, alignment and diplomatic momentum, but at the cost of accepting structural asymmetries.
The agreement will not fail. It will expand trade and investment in several sectors. But in agriculture and climate-sensitive exports, it risks becoming a slow burn, one where the headline gains fade as regulatory and carbon costs accumulate. For a country that seeks to shape the rules of global trade rather than adapt to them, that is not a small concern. (5WH)
