The conclusion of the India-EU Free Trade Agreement (FTA) marks a strategic shift in India’s trade engagement with Europe, but its immediate impact on the steel sector remains limited, with carbon regulation, tariff structures and timing emerging as binding constraints, Kallanish understands.
Market participants broadly agree that steel trade is unlikely to receive a near-term boost, as CBAM remains fully intact. CBAM does not provide exceptional treatment for individual countries or industries and the FTA does not alter its application.
This pressure has intensified following the withdrawal of EU Generalised System of Preferences (GSP) benefits for India from 1 January 2026, under the bloc’s graduation rules. An industry veteran stresses that this move is not part of the FTA but materially reshapes market access conditions.
The EU removed GSP tariff preferences on around 87% of Indian exports, including iron and steel. As a result, these products now face most-favoured nation (MFN) duties of 2-7%. Sources estimate these translate into an average competitiveness loss of around 20%, once duty impact, logistics and pricing effects are combined with CBAM compliance costs.
India’s commerce ministry highlights the FTA includes forward-looking MFN assurances under CBAM, enhanced cooperation on carbon pricing recognition, verifier accreditation, best available technology and decarbonisation pathways, alongside access to EU technical and financial support. Market participants acknowledge these elements improve long-term visibility, but stress they do not ease near-term cost pressures.
“[Steel] exporters are set to face significant pressure following the withdrawal of GSP benefits and implementation of CBAM. However, a recovery may emerge by 2030 if FTA quotas [TRQs] can offset these costs, provided India successfully scales green steel production to meet CBAM standards for sustained EU market access,” an industry veteran notes.
“But we are happy after India declared the new FTA as the ‘mother of all deals’,” he adds.
Some participants see greater downside than upside risk in the near term, as improved access under the FTA could support inflows into India of specialised EU-origin steel, particularly plate and rail-linked products.
Kallanish analysis suggests the real steel impact of the India-EU FTA is indirect, via steel-consuming sectors (see table).
The engineering exports sector, a key steel end-user, stands out as the most positively impacted. Industry estimates suggest engineering exports to the EU could rise by around 25% year-on-year, from a current base of about $21 billion, supporting structurally higher domestic steel demand.
Automobiles may also benefit from quota-based liberalisation and regulatory cooperation. Other end-user sectors, including electronics, medical instruments, pharmaceuticals, aerospace and others, similarly support incremental steel demand.
Impact analysis
| Segment | FTA provision | Key data & tariffs | Impact on Indian steel |
| Steel Exports | Included under TRQs | GSP MFN duties (typically ~2-7%) remain; preferential access managed via quotas | Marginal/strategic: Limits direct volume but provides predictable access |
| Steel Imports | 22% duty cut to 0% phased over 10yrs, €1.5 billon in 2024 | Current ~0.3-0.4mt, mainly specialty steel | Moderate risk/opportunity: Benefits domestic mfg/infra via cheaper high-end steel as landed costs fall, but risk for domestic steel producers |
| CBAM | No outright exemption; technical cooperation expected | – | Structurally negative: high compliance risk for non-green steel |
| Engineering Goods | Current EU tariffs up to 22% removed | Estimate +25% y-o-y to $21bn | Strong Positive: Significant indirect demand for domestic steel |
| Mines & Minerals | Zero duty across 100% of tariff lines | Removes cost barriers for value-added mineral exports | Strategic Positive: Fuels partnerships with EU steel manufacturers |
| Machinery & Aerospace | Product Specific Rules with transition periods | Encourages ‘Make in India’ for complex manufacturing | Positive: Long-term growth in specialised steel consumption |
| Decarbonisation | Technical group for BAT, MRV, and verification | Focus on alignment with EU carbon standards | Strategic Positive: Essential pathway for sustained EU market access |
Source: commerce ministry, industry estimates, Kallanish
While the India-EU FTA enhances competitiveness by eliminating tariffs, CBAM remains a critical structural hurdle, shifting the advantage toward low-carbon producers through technical cooperation rather than tax exemptions.
Overall, the India-EU FTA reshapes the downstream demand environment for steel without changing the fundamentals of steel trade. For Indian steel, the opportunity lies less in near-term exports to Europe and more in supplying a more export-oriented, higher-value and increasingly decarbonised manufacturing base domestically.
