Decoding the EU-India FTA: Chemicals & Sustainability

Last month, the European Union and India concluded over three years of negotiations on a long-awaited deal for a Free Trade Agreement. Across automotive, steel, chemicals, plastics, pharmaceuticals, and agri-food, the emerging EU-India trade agreement has the potential to significantly reshape trade flows between two major industrial powers.

Following the first, second and third part of our series on the EU-India FTA focused on pharmaceuticals, automotive and metals, and agri-food & alcoholic beverages, our final part in the series considers impacts on the chemicals and plastics industry, in addition to broader measures related to climate and sustainability.

Chemicals & Plastics  

Davide Bertot, Account Executive, FleishmanHillard EU

The agreement strengthens the EU’s position in specialty and high-value chemicals by eliminating most tariffs and reinforcing market access in India. 

For chemicals and plastics, the agreement provides market-opening benefits for both parties and reflects the strategic importance bilateral trade in these two areas. In 2024 alone, the EU’s plastics exports to India totalled €2.2 billion (facing tariffs up to 16.5 %) and chemicals €3.2 billion (tariffs up to 22 %). Following the agreement, both sectors will see tariffs reduced to zero for almost all products, supporting continued growth in a fast-expanding market and helping level the playing field against lower cost competitors such as China, who maintains the dominant position in when it comes to bulk and basic chemicals. 

India is also expected to benefit, even as most of its chemical exports already face low tariffs (around 3.8 % on 97.5 % of exports by value), with the new agreement set eliminate all duties and allowing domestic industry to increase competitiveness.  

Climate & Sustainability  

Alessandra Botta, Account Director, Chiara Marenco, Account Executive, and Nichole De Leeuw, Account Executive, FleishmanHillard EU

The EU and India have opted for cooperation on climate measures rather than exemptions, with CBAM remaining fully applicable despite Indian pushback. Uncertainties around implementation mean that forthcoming cooperation will be key to clarifying its practical impact. 

The EU’s Carbon Border Adjustment Mechanism (CBAM), which applies a carbon price to imports of emission-intensive goods to mirror costs EU producers face under the Emissions Trading System (EU ETS), was a central issue throughout negotiations. Despite Indian efforts, the agreement resulted in no exemption or preferential treatment under CBAM for Indian goods entering the EU.  

Yet, key details remain unclear, notably whether carbon costs paid under India’s Carbon Credit Trading Scheme (CCTS) will be recognised for compliance. The Indian government has indicated it has obtained assurances that any future flexibilities granted to third countries would automatically extend to India, a parity clause similar to that which was applied vis-à-vis the US.  

On climate, instead of regulatory concessions, the deal focuses on cooperation. Both sides agreed to a Memorandum of Understanding to establish a platform on climate action in first half of 2026. Supported by €500 million in EU funding, the platform will cover methodologies, verification and decarbonisation pathways.  

For other topics, the agreement includes a chapter on sustainability, labour rights and climate cooperation, however these commitments rely on consultation rather than binding enforcement. Ultimately, the planned EU-India climate platform and financial support will be important to sustain cooperation and manage adjustment costs. 

What are the next steps of the EU-India FTA?

A full assessment of the deal will be possible once the texts are published in the coming weeks. Yet, compared to today’s highly protectionist baseline, the announcements suggest that the deal marks a clear step forward, opening key sectors and strengthening bilateral economic ties.

In terms of next steps, our experts anticipate an overall smooth adoption process. On the EU side, the deal involves EU competences only. As a result, the agreement will not require national ratification, but only approval from the European Parliament and the agreement in Council. At the same time, the cabinet of the Indian government will approve the deal. If all goes according to plan, the deal will come into force by early 2027. 

This article is the last part in our series analysing the EU-India FTA.