After more than a decade of interrupted negotiations, the free trade agreement between the European Union and India is closer than ever. What does this mean for those who export to India? And how can they prepare?
The State of the Negotiations: Finally, an Acceleration
After years of false starts, negotiations for the EU-India Free Trade Agreement have found a concrete rhythm. India and the European Union are conducting monthly rounds of negotiations with the stated goal of concluding the agreement by the end of 2025, although diplomatic sources consider early 2026 to be more realistic.
European Commission President Ursula von der Leyen has called this agreement “the largest of its kind in the world.” This is no exaggeration: it involves connecting a market of 450 million European consumers with India’s market of 1.4 billion people, with a combined GDP exceeding $20 trillion.
The geopolitical context is pushing both sides towards an agreement. Europe is seeking to reduce its dependence on China and diversify its supply chains. India wants to consolidate its role as a global economic power and attract Western investment. The result is an alignment of interests unseen in decades.
What Would Change for Italian Companies
The current customs tariffs that Italian companies pay to export to India are among the highest in the world. Some concrete examples:
- Automotive and components: tariffs ranging from 30% to 125% on finished vehicles, 7.5-15% on components
- Industrial machinery: 7.5-10% on general machinery, up to 28% on certain specialized categories
- Wines and spirits: 150% on wines, 100% on whiskey and spirits
- Textiles and clothing: 10-20% on fabrics, 20-25% on finished clothing
- Pharmaceuticals: 10% on finished drugs, 2.5% on active ingredients
- Cosmetics and perfumes: 10-20% depending on the category
An FTA would eliminate or drastically reduce these barriers. For a company that exports €5 million per year to India in a sector with a 15% tariff, we are talking about immediate savings of €750,000 per year. Over a ten-year period, this amounts to over €7 million.
But the value of the agreement goes beyond simple tariff reduction. The FTA should include:
- Simplification of customs procedures: faster customs clearance, less documentation, standardized procedures that reduce administrative and logistical costs.
- Mutual recognition of standards and certifications: products that comply with European standards could be more easily accepted in India without having to undergo costly conformity testing.
- Greater protection of intellectual property: the agreement should strengthen the protection of patents, trademarks, and protected geographical indications, which is crucial for sectors such as food and fashion.
- Openness in public procurement: European companies could access Indian government contracts with fewer restrictions, a huge market especially in infrastructure.
- Temporary mobility of professionals: Facilitation for the deployment of technical and managerial personnel for installation, maintenance, training, and project supervision.
The Industries that Will Benefit Most
Not all sectors will benefit equally from the FTA. Some Made in Italy sectors are particularly well positioned:
- Industrial machinery and technology: Italy is Europe’s second largest exporter of industrial machinery. India is modernizing its entire manufacturing base. The reduction of tariffs and simplification of procedures would make Italian machinery even more competitive compared to Asian alternatives. Machinery already accounts for 39.2% of Italian exports to India, worth around €2 billion.
- Automotive and components: India is investing heavily in electric and hybrid mobility. Italian suppliers of transmission systems, electronic components, car interiors, and electrification technologies could see explosive demand if tariff barriers were lowered. Automotive is the sector that attracts the most Italian investment in India (29.8% of total FDI).
- Fashion, design, and luxury goods: the Indian luxury market is growing at double-digit rates. India’s upper-middle class now numbers over 100 million people with high purchasing power. But current tariffs make Italian products prohibitively expensive. An FTA would democratize access to Italian luxury goods.
- Agri-food and food processing: Italian technologies for food processing, packaging, and preservation are world leaders. India, with the largest agricultural population on the planet, is modernizing its entire supply chain. Reducing tariffs on food machinery would open up enormous opportunities.
- Pharmaceuticals and medical devices: India is already the “pharmacy of the world” for generics, but it is investing in innovative drugs and advanced medical devices. Italian companies in medical devices, diagnostics, and specialty drugs could significantly expand their presence.
Obstacles to Overcome
Despite the optimism, complex issues remain to be resolved. Negotiations are focusing on the following critical areas:
- Access to the agricultural market: Europe wants greater openness for dairy products, wines, and meat. India strongly protects its agricultural sector for social and economic reasons. Finding a balance is difficult.
- Protection of geographical indications: Europe is calling for full recognition of PDO, PGI, and protected designations. India is wary of overly restrictive constraints that would limit local production.
- Access for Indian professionals to Europe: India wants to make it easier to send IT workers and qualified professionals. Some EU countries are reluctant for reasons of internal migration policy.
- Sensitive sectors and safeguard clauses: both sides want to maintain protections for strategic sectors and mechanisms to suspend concessions in the event of sudden surges in imports.
Getting Ready: the Legal and Business Strategy
Italian companies cannot afford to wait for the agreement to be signed before taking action. Here are the steps to take now:
- Map the market and identify partners: start identifying distributors, importers, or potential joint venture partners. Building trusting relationships in India takes time. It is better to start now than to rush when everyone else does the same.
- Check the customs classification of your products: not all products will see the same tariff reductions. Check your precise customs classification and anticipate what concrete benefits the FTA will bring to your exports.
- Protect your intellectual property: register trademarks, patents, and designs in India before entering the market. Many companies discover too late that someone has already registered their trademark locally. India recognizes “first to file,” not “first to use.”
- Adapt commercial contracts: Distribution, agency, and license agreements must be drafted in accordance with Indian law with appropriate clauses on jurisdiction, dispute resolution, and protection clauses in case of default.
- Structure your local presence correctly: decide whether to operate through direct export, distributor, joint venture, or subsidiary. Each option has different tax, operational, and strategic implications.
- Plan for tax compliance: India introduced the Goods and Services Tax (GST) in 2017, simplifying the tax system but still requiring strict compliance. Tax structures should be planned in advance with specialist advisors.
- Train your internal team: working with India requires specific skills: knowledge of the cultural context, ability to manage time zones, understanding of local negotiation dynamics. Invest in training and building a dedicated team.
The Importance of Timing: Taking Immediate Action
When the FTA comes into force, there will be a rush effect: thousands of European companies will simultaneously rush into the Indian market to take advantage of the new conditions. The best distributors will already be busy, the fastest brands will have already built awareness, and the most promising niches will already be occupied.
Companies that move now, structuring themselves in the market before the agreement is signed, will enjoy a huge first-mover advantage. When your competitors arrive, you will already have consolidated relationships, understood local dynamics, adapted products and marketing, and built a reputation.
Support from Roncucci&Partners
Roncucci&Partners assists companies that wish to enter the Indian market with an integrated approach:
Preliminary feasibility analysis: assessment of specific opportunities for your sector and product
- Corporate structuring: choice of the optimal legal form and establishment of local entities
- IP protection: registration and protection of trademarks, patents, designs, and trade secrets
- Contract negotiation and drafting: joint ventures, distribution, licensing, supply
- Tax and corporate compliance: tax-efficient and compliant structures
- Dispute management: international arbitration and commercial litigation
The time to act is now. India is waiting for you, and the Free Trade Agreement is closer than you think.
For advice on expanding into India and preparing for the FTA, email us at info@roncucciandpartners.com.
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