Behind the headlines, the agreement contains no CBAM exemption, potential threats to generic pharmaceuticals, and automobile tariff cuts that reshape domestic manufacturing

I was in Rangpur Division in northern Bangladesh when the negotiations for this trade agreement first began in 2007. The programme I was working on had just documented how seasonal hunger pushed rural families into distress migration every year between rice harvests. One thing I learned in those years: trade agreements look very different depending on whether you are reading them in Brussels or in a village where people count meals.

When European Commission President Ursula von der Leyen called the India-EU Free Trade Agreement the "mother of all deals" at the joint announcement on January 27, she was not wrong about its scale: two billion people, over $22 trillion in combined market size, the largest bilateral trade agreement concluded globally in recent years.

But "large" and "good for India" are not synonyms. The agreement's fine print reveals concessions, exclusions, and asymmetries that received far less attention than the celebratory photo opportunities. What India gained is clear: tariff-free access for textiles, chemicals, and leather goods to a wealthy market. What India gave up, or failed to secure, deserves equivalent scrutiny.

The CBAM Problem Nobody Wants to Discuss

The most consequential aspect of this FTA for India's industrial future may be what it does not contain: any meaningful relief from the European Union's Carbon Border Adjustment Mechanism.

CBAM, which came into full effect on January 1, 2026, imposes a carbon levy on imports of steel, aluminium, cement, fertilisers, electricity, and hydrogen into the EU. Importers must purchase CBAM certificates at prices mirroring the EU's Emissions Trading System, currently around €70-100 per tonne of CO2.

The European Commission has been explicit: "There is no commitment on the part of the EU to change our obligations with regard to CBAM, or grant India more favourable treatment." India's treatment will be no different from any other country.

The numbers are brutal. The Global Trade Research Initiative estimates that Indian exporters may need to cut prices by 15-22% to absorb the carbon tax burden. Studies suggest an additional tax burden of 20-35% on Indian steel and aluminium exports, likely to rise further by 2030 as the EU phases out free allocation of carbon allowances.

The exposure is significant. Approximately 38% of India's steel exports and 27% of aluminium exports go to the EU. India's steel sector is among the most carbon-intensive globally because of heavy reliance on coal-based blast furnace production. The technology transition required to decarbonise Indian steel would cost tens of billions of dollars and take a decade to implement. CBAM does not wait for this transition.

Under Global Efficiency Intelligence's projections, CBAM will result in import charges of approximately $83 per ton of Indian steel in 2030, rising to $243 per ton by 2034. That is the equivalent of a 20-30% effective tariff.

Consider what this means for a steel exporter. A company that currently earns a 10% margin on EU sales would see that margin entirely consumed by CBAM charges. The choices are stark: absorb the cost (becoming unprofitable), pass it on (becoming uncompetitive), or exit the market. Indian steel's EU market share, built over decades, could collapse within years.

What did India secure in the FTA negotiations? A "technical dialogue" mechanism to help Indian companies verify their carbon data. A commitment that any CBAM flexibility offered to any other country will also apply to India, which is cold comfort when the EU has indicated it will offer flexibility to no one. And €500 million in EU support over two years for India's greenhouse gas mitigation efforts, a sum that represents approximately 0.1% of what CBAM could cost Indian exporters over the same period.

The argument from trade negotiators is that CBAM was never on the table. The EU refused from the start to provide country-specific exemptions. But this framing eludes a critical question: if the EU's most consequential trade barrier for Indian industry could not be addressed, what exactly was India trading away its concessions for?

Generic Pharmaceuticals: The Unresolved Threat

India's generic pharmaceutical industry, worth approximately $25 billion and accounting for 50% of global generic drug exports, has long been the target of pressure from wealthy countries seeking stronger intellectual property protections.

The draft EU negotiating text, published in 2022, included provisions that alarmed health advocates globally: data exclusivity requirements, patent term extensions, and IP enforcement measures that went beyond World Trade Organisation TRIPS requirements.

Data exclusivity is particularly threatening. Under such provisions, generic manufacturers would be blocked from using clinical trial data to register medicines for a period of years, even when no patent exists on the drug. Médecins Sans Frontières warned that if India introduces data exclusivity, pharmaceutical companies could stop others from registering generic versions of their medicines for the exclusivity term, even without a patent.

India's Patents Act of 2005 contains safeguards, particularly Section 3(d), which restricts patents on new forms or uses of known substances unless they significantly increase efficacy. This provision has blocked pharmaceutical company efforts to extend monopolies through "evergreening." Data exclusivity would effectively bypass these safeguards through a different legal mechanism.

The final FTA text has not yet been made public. Commerce Ministry officials have indicated that India resisted TRIPS-plus provisions, and the Commerce Secretary has previously stated that "there is no Free Trade Agreement in which India will go against the generic drug industry."

But the concern has not disappeared. A February 2024 Trade Sustainability Impact Assessment report commissioned by the European Commission itself recommended that the IP chapter "should be modified to not go beyond the minimum standards of IP protection under the WTO TRIPS Agreement." Whether this recommendation was followed awaits the release of the full legal text.

The stakes are not theoretical. In Jordan, where data exclusivity was introduced as part of a US-Jordan FTA, a study found that of 103 medicines launched since 2001 that have no patent protection, at least 79% have no generic competition as a consequence of data exclusivity. India supplies over 80% of the medicines used by MSF to treat HIV/AIDS patients globally. Any restriction on generic production has consequences far beyond India's borders.

When I was working in Bangladesh, the antiretroviral drugs that kept HIV patients alive came from Indian generic manufacturers. When I worked on the Oxfam inequality report, we documented how global health depended on India's generic pharmaceutical industry. The FTA's IP provisions are not abstract trade policy. They determine whether poor people in Africa, Asia, and Latin America can afford medicines that keep them alive.

The final text will reveal whether India's negotiators protected this industry's flexibility or whether commercial pressures prevailed. Until that text is public, no assessment is complete.

The Automobile Asymmetry

The automobile provisions have received the most attention, largely because the numbers are dramatic: tariffs on European car imports will fall from 110% to as low as 10%, through a quota-based system that will allow up to 250,000 EU vehicles annually at reduced rates.

The government's defence is that the quota applies primarily to premium segments, cars retailing above ₹25 lakh, where domestic manufacturing presence is minimal. Lower quotas will apply in mass-market segments. And for every car quota given to the EU, India will receive 2.5 times the access for its exports.

But the concerns are real. The European Council on Foreign Relations noted Indian industry's fear that tariff cuts would "flood the domestic market with European cars, which could have an adverse impact on investment and on the 'Make in India' campaign."

The asymmetry in tariff structures is stark. The EU's current tariff on Indian cars is approximately 10%. India's tariff on EU cars is 110%. After the FTA, the EU's tariff will be eliminated entirely for Indian vehicles, while India will still impose 10% on EU vehicles even under the quota system. In percentage terms, India is making larger concessions.

The Indian government's own analysis reportedly suggests India will be a "net loser from the FTA in terms of trade in goods, primarily as a result of the loss of revenues from lower or zero tariffs." The gains are expected to come from services.

Whether those services gains materialise depends on implementation. The EU has offered India access to 144 out of 155 service sub-sectors, one of its best-ever offers. But the critical demand India has consistently pressed, easier temporary movement of professionals under "Mode 4" services trade, runs into domestic opposition in EU member states. Visa regimes remain controlled by individual countries, not the European Commission. A commitment in Brussels may not translate to consulates in Berlin, Paris, or Amsterdam.

What Was Protected, What Was Surrendered

The FTA's exclusions reveal the political sensitivities on both sides.

India protected dairy, cereals, poultry, and soya meal. No duty reductions. Indian dairy supports approximately 80 million smallholder farmers; liberalisation could destabilise this value chain entirely. The EU protected sugar, beef, chicken, and rice, the sensitive agricultural products that have sparked farmer protests across Europe.

Neither side addressed Geographical Indications, which will be handled in a separate agreement. Investment protection was also carved out for separate negotiation. Government procurement, where the EU sought access to Indian public contracts, India refused.

The areas that were opened show asymmetry. European wines and spirits will see tariffs halved immediately, eventually reaching 20-30% depending on price band. European olive oil will see tariffs drop from 45% to zero over five years. European processed foods and meats currently facing 33-150% duties will see substantial reductions.

Indian exports gain duty-free access for textiles, chemicals, leather, and seafood, sectors that already compete globally and where the EU's existing tariffs were relatively low, averaging 3.8% before the deal. The EU will eliminate tariffs on approximately 90% of Indian goods on day one of implementation.

What the Agreement Should Have Contained

Trade agreements involve compromise. No negotiation delivers everything. But what would a genuinely balanced agreement have included?

First, CBAM transition relief. If exemption was impossible, the agreement should have secured a longer transition period for Indian exporters, technical assistance funding commensurate with actual adjustment costs (billions, not €500 million), and guaranteed access to EU carbon accounting methodologies at no cost to Indian firms.

Second, explicit IP safeguards. Rather than ministerial assurances, the legal text should contain explicit language affirming that nothing in the agreement prevents India from using TRIPS flexibilities, including compulsory licensing and the Section 3(d) anti-evergreening provision. The full legal text should be published before ratification so civil society can verify these protections.

Third, binding Mode 4 commitments. Services liberalisation without visa liberalisation is asymmetric. The agreement should include specific targets for skilled worker visas, processing time commitments, and complaint mechanisms when member states fail to honour EU-level commitments.

Fourth, automobile transition support. If tariffs are being reduced, the agreement should include technology transfer provisions, joint venture requirements for access to the reduced-tariff quota, and domestic content requirements that phase in over time. Market access should come with capacity building.

Fifth, sunset and review clauses. Trade agreements should not be permanent. A mandatory review at five years, with the option to renegotiate provisions that have not delivered expected benefits, would provide flexibility that the current agreement lacks.

The Question of Transparency

The deal was concluded on January 27, Republic Day week, with von der Leyen and European Council President António Costa as chief guests at the Republic Day parade. The optics were deliberate.

The agreement still requires approval from the European Parliament, a process that could take a year or more and has historically proven contentious. The EU-Mercosur agreement remains in limbo partly due to parliamentary resistance. On the Indian side, the Cabinet must approve.

What has been notably absent is detailed public disclosure of the full agreement text. The negotiating positions, the chapters, the specific commitments all remain confidential pending "legal scrubbing." Civil society organisations have been unable to assess whether IP provisions threaten generic medicine access, whether labour and environmental chapters contain enforceable commitments, or whether dispute resolution mechanisms favour corporate interests.

This opacity is not unusual in trade negotiations. It is, however, inconsistent with claims of a "mother of all deals" that will benefit two billion people. Those two billion people might reasonably ask to see what their governments agreed to on their behalf.

A Balance Sheet

The EU-India FTA is neither a catastrophe nor a triumph. It is a trade agreement negotiated under specific constraints: Trump-era tariffs on both sides creating urgency, geopolitical positioning against China creating shared interest, domestic political calendars creating deadlines.

What India gained: duty-free access for labour-intensive exports to a wealthy market; a strategic partnership with a bloc actively diversifying away from China; services market access that could benefit IT and professional services if visa issues are resolved; a security and defence partnership that reduces dependence on Russian military supplies.

What India did not gain: any relief from CBAM, which will increasingly penalise carbon-intensive exports; clear protection for its generic pharmaceutical industry's future flexibility; symmetrical market access in automobiles; or time, since implementation is expected by early 2027.

Trade agreements create winners and losers within both signing parties. Indian textile exporters will likely benefit; Indian steel and aluminium exporters will likely suffer. Indian consumers will gain access to cheaper European wines and cars; Indian automobile manufacturers will face new competition. The aggregate welfare effect is genuinely uncertain.

The timing matters too. Implementation is expected by early 2027, giving Indian industry less than two years to adjust. For sectors facing CBAM costs, this is insufficient time to decarbonise. For automobile manufacturers, this is insufficient time to develop competitive products. The agreement front-loads costs and back-loads uncertain benefits.

What is certain is that the phrase "mother of all deals" was marketing, not analysis. The deal's actual consequences will unfold over years and will be determined by chapters and clauses that remain, for now, unpublished. The celebration can wait until we know what was actually signed.

Varna is a development economist and writes at policygrounds.press.

Further Reading

1. Business Standard: India Gets No CBAM Concessions - What the FTA actually says about carbon costs

2. MSF Access Campaign: EU-India FTA and Access to Medicines - The pharmaceutical IP concerns from a public health perspective

3. Global Efficiency Intelligence: Impact of EU CBAM on Global Steel Trade - Projections of carbon costs through 2034

4. ECFR: The FTA—A Strategic Call for the EU and India? - Analysis of negotiating asymmetries and strategic context