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- India and the European Union are in the final stages of sealing a long-pending Free Trade Agreement (FTA), with a conclusion expected during the 16th India-EU Summit on January 27, 2026.
- De Facto Trade Barrier: Effective from January 1, 2026, the CBAM imposes a carbon tax on energy-intensive imports like steel, aluminum, and cement, which India views as a protectionist tool.
- Economic Impact on MSMEs: Indian exporters, particularly in the steel sector, face an estimated 15%–22% cost increase, potentially pricing out small and medium enterprises from the European market.
- Violation of Climate Equity: New Delhi argues that CBAM contradicts the UN principle of Common but Differentiated Responsibilities (CBDR) by penalizing developing nations for their coal-dependent industries.
- Negotiation Deadlock: India is pushing for a total exemption or a long transition period, while the EU maintains that the tax is essential to prevent carbon leakage and meet Green Deal targets.
- The 95% vs. 90% Dispute: The EU is demanding tariff elimination on 95% of trade lines, whereas India is only willing to open 90% of its market to protect sensitive domestic industries.
- The Dairy and Agriculture Redline: India has largely excluded dairy and poultry from the talks to protect the livelihoods of millions of small farmers from highly subsidized European imports.
- High-Tariff Sectors: The EU is seeking deep cuts in India’s steep duties on automobiles (60%–100%) and wines and spirits, while India is only considering phased reductions or limited quotas.
- Geographical Indications (GIs): Tensions persist over the EU’s demand for automatic protection of products like Champagne and Feta, which conflicts with generic names currently used in the Indian market.
- Mobility and Visas: A primary Indian demand is the liberalization of Mode 4 services, which would allow easier work permits and visas for Indian IT and healthcare professionals.
- Data Adequacy Status: India is seeking a Data-Secure designation from the EU to allow the seamless flow of data, which is currently restricted, increasing compliance costs for Indian tech firms.
- Regulatory Non-Tariff Barriers: Indian pharma and food exporters face a dense web of standards, including stringent pesticide residue limits and certification costs that often nullify the benefits of tariff cuts.
- Financial and Legal Services: The EU is pushing for greater access to India’s banking and legal sectors, a move strongly opposed by domestic bodies like the Bar Council of India.
