India's landmark EU and US trade pacts expand access but delivery will determine gains

India’s twin commercial breakthroughs with the European Union and the United States create materially larger preferential entry for a wide range of goods, promising new routings for producers from textiles and gems to machinery and chemicals. The U.S. understanding — described by officials as including reciprocal tariff reductions on covered Indian goods and large procurement commitments — has been reported in headline terms at above $500 billion, while the EU accord formalises market access and regulatory cooperation after long negotiations.

Investors reacted quickly: equities and sectoral names tied to renewables, parts supply and capital goods rallied on expectations of easier inputs and procurement pipelines. Yet the practical test is operational: exporters must be able to translate tariff openings into more shipments despite heavy compliance costs and technical customs work. India’s structural weakness is low use of preferential regimes — FTA utilisation sits near 25% compared with roughly 70–80% in many advanced economies — and past trends show an asymmetric pattern in which exports to FTA partners rose ~31% while imports climbed ~82% between 2017 and 2022.

A significant procedural shift in the EU deal and related instruments places more origin verification responsibility on exporters, raising their legal exposure through self‑certification and heightening the need for clearer customs rulings, graduated audit regimes and practical certification services. Non‑tariff barriers — inconsistent lab testing, labelling regimes and interpretive differences over rules of origin — remain prominent sources of friction that can negate tariff advantages for price‑sensitive producers.

Competitiveness shortfalls are often driven by logistics and predictability rather than tariffs alone. Peers such as Vietnam have gained market share through faster clearance, integrated supply chains and lower transaction costs. For India to scale exports, reforms must therefore prioritise port throughput, customs modernisation, digital certification, reduced paperwork and targeted industrial policy that attracts sustained foreign investment.

The U.S. package also contains a geopolitical element: New Delhi’s stated intention to diversify energy supplies away from Russian crude toward U.S. and other sources will have immediate implications for input costs, shipping patterns and procurement choices. Policymakers describe the twin commercial moves as a deliberate hedging strategy that broadens market options and complements ongoing outreach to the Gulf Cooperation Council, a bloc that accounts for roughly 15% of India’s trade.

Implementation — memoranda of understanding, quota adjustments, legal codification of procurement pledges and robust verification mechanisms — will determine whether the headlines translate into durable shipments, investment and jobs. If delivery is swift and bureaucratic frictions are pared back, the deals could accelerate private investment, advance the government’s $1 trillion‑per‑year exports objective and help narrow sovereign premia through stronger growth. If not, the episode risks being mainly political signalling with limited structural effect for exporters and labour‑intensive industries.