When the India-European Union Free Trade Agreement was signed on January 27, 2026, the headlines focused on the big numbers: two billion people, 25% of global GDP, the “mother of all deals.” But dig beneath the surface, and you’ll find the real story lies in something far more fundamental, the raw materials flowing between these two economic giants.
This isn’t just about eliminating tariffs or opening markets. It’s about reconfiguring the entire supply chain of raw material categories that power modern industry, from the steel in wind turbines to the chemicals in pharmaceutical labs. For Indian exporters, the agreement represents a dramatic pivot point. Either adapt to Europe’s exacting standards and capture massive new opportunities or get left behind in an increasingly regulated global marketplace.
The Raw Material Challenge
Consider the timing. Just as India lost its Generalised Scheme of Preferences benefits on 87% of exports in January 2026, essentially watching tariffs snap back to full rates overnight, the FTA arrives as a critical intervention. For raw material exporters, this wasn’t just economically painful; it was existential. When you’re shipping petrochemicals, metals, or industrial chemicals on razor-thin margins, a sudden 10 to 12% tariff increase can wipe out profitability in a single quarter.
The FTA eliminates duties on over 70% of tariff lines immediately, covering more than 90% of export value. But here’s the critical insight. Winning in this new landscape requires more than just cheaper prices. It demands a fundamental transformation in how Indian raw material producers think about quality, traceability, and environmental impact.
Petrochemicals and the New Verification Economy
India’s petroleum refiners found themselves in an unexpected position in 2025 as strategic partners in Europe’s energy independence. As the EU scrambled to replace Russian crude, Indian refined products became critical. In the third quarter of 2025 alone, petroleum exports to Europe hit $3.55 billion, representing over a quarter of India’s global output in that raw material category.
But there’s a requirement that illustrates the new rules of the game. European buyers now demand proof, documented and verifiable proof, that refined products don’t originate from Russian crude oil. For an Indian refiner processing mixed feedstock, this creates a substantial documentation challenge. The FTA provides the framework for this verification, but the burden falls squarely on exporters to build systems that can track every barrel from source to shipment.
This is the future of raw material trade. Access guaranteed by agreements, but credibility earned through documentation.
The Chemical Opportunity
If petrochemicals are about volume, specialty chemicals are about value. India has built a global reputation in pharmaceutical ingredients and organic compounds, yet European market share remains stubbornly low at just 2.2% of the bloc’s pharma imports despite being a generic manufacturing powerhouse.
India’s organic chemicals exports to the EU showed resilience in 2025, with heterocyclic compounds (HS 2933) reaching $320 million in Q3 2025, up from earlier quarters amid a steady global total of approximately $1.08 billion quarterly. Standouts like amines (HS 2921) at $79.4 million and carboxyamides (HS 2924) at $76 million gained traction despite GSP loss headwinds, deepening EU market share to 29.5% for heterocyclics. The India-EU FTA arrives perfectly timed, eliminating tariffs on 97% of these raw materials while enabling regulatory cooperation to slash REACH approval costs, positioning Indian CDMOs to capture high-margin tolling from China diversification shifts and deliver 100 to 400 basis points EBITDA gains.
For Contract Development and Manufacturing Organizations (CDMOs), this is transformative. As European innovators look beyond China for their raw material sourcing, Indian chemical manufacturers are positioned to capture high-margin tolling contracts. Industry analysts project EBITDA margin improvements of 100 to 400 basis points, the kind of boost that can turn a mid-tier producer into a category leader.
Inorganic chemicals present a similar trajectory. Indian carbon blacks, essential raw materials for the automotive and electronics industries, already command a 32.5% share of EU imports with Q3 2025 exports reaching $41.2 million. The removal of tariffs ranging from 3.8% to 5.5% provides immediate price competitiveness. More significantly, the agreement facilitates regulatory alignment with REACH standards, which has traditionally been a formidable barrier for Indian firms.
Metals and the Carbon Reality
The ferrous and non-ferrous metals categories present the starkest illustration of how environmental regulations are rewriting trade rules. The FTA eliminates tariffs up to 22% on steel products. But here’s the reality. Indian steel exports to the EU plummeted 35% in FY2025, not due to tariffs, but because of the Carbon Border Adjustment Mechanism.
CBAM is essentially a carbon tax on emissions-intensive production. Most Indian steel comes from carbon-intensive blast furnaces, while European plants increasingly use cleaner electric arc technology. The FTA cannot eliminate these emissions concerns. What it can do is provide easier access to European steel scrap, a critical raw material for lower-carbon production, and create technical working groups to help Indian producers measure and certify their carbon footprint.
For aluminum and copper, the calculation is similar but the opportunity clearer. As Europe races to build electric vehicle infrastructure and renewable energy capacity, demand for these raw material categories is surging. Indian producers who can demonstrate clean production methods will find eager buyers. Those who cannot, will find closed doors, regardless of zero tariffs.
The non-ferrous metals sector shipped $102.6 million worth of unwrought aluminum and $12.6 million worth of refined copper to Europe in the third quarter of 2025. These figures represent just 10 to 11% of global exports in these raw material categories, suggesting enormous room for growth once carbon compliance systems are in place.
Natural Rubber and the Traceability Imperative
Perhaps no raw material category faces a steeper compliance challenge than natural rubber. India exports $230.4 million worth of pneumatic tires to Europe quarterly, capturing nearly 31% of its global tire shipments. The FTA eliminates the 4.5% tariff, making Indian brands more competitive.
But starting late 2026, the EU Deforestation Regulation requires farm-level geolocation data for every rubber product. Consider the implications. A smallholder plantation in Kerala must now provide GPS coordinates proving their land wasn’t recently converted from forest. For an industry built on aggregated supply from thousands of small farms, this isn’t just paperwork. It’s a complete supply chain overhaul requiring blockchain traceability and digital documentation.
Similar requirements affect paper, leather, and coffee. The raw material itself hasn’t changed, but proving its provenance has become as important as proving its quality. Indian paper and board exports, worth $44.3 million quarterly to Europe, now require extensive documentation showing that timber sources didn’t contribute to forest degradation after December 31, 2020.
Textiles and the Fiber Transformation
Textiles represent the clearest win in the raw material equation. Indian cotton yarn, synthetic fibers, and woven fabrics have long suffered from a brutal tariff disadvantage, facing 9 to 12% duties while Bangladesh and Vietnam enjoyed zero-rated access. That handicap evaporates under the FTA.
Indian cotton yarn exports to Europe reached $61.1 million in the third quarter of 2025, while synthetic filament yarn added another $19.2 million.
More significantly, duty-free access to European synthetic raw materials will catalyze investment in man-made fiber processing, an area where India has historically lagged. When major European brands can source finished products at competitive prices, they’ll also need the raw material inputs such as polyester, nylon, and specialized blends that Indian manufacturers can now access cheaply from European suppliers and process domestically.
The coconut and agave fibers segment already shows Indian dominance, with $44.6 million in Q3 2025 exports representing nearly 30% of global shipments flowing to Europe. The FTA solidifies this position and opens pathways for value addition in technical textiles.
Polymers and the Circular Economy
The plastics and polymer raw material category has been a consistent growth driver. Under the FTA, tariffs that previously averaged 10.4% in India and 6.5% in the EU will be eliminated for almost all products. Indian manufacturers of plastic plates, sheets, films, and strips exported $57.5 million worth to Europe in the third quarter of 2025, positioning them for substantial growth.
This sector is a prime beneficiary of the FTA’s focus on small and medium enterprises, as many specialized plastic article manufacturers are medium-sized operations that will now gain easier access to European construction and packaging supply chains.
However, the challenge lies in adapting to Europe’s tightening requirements on recycled content and sustainability. Indian plastic exporters will need to align with European circular economy mandates to maintain their preferential access.
The Data Imperative
Here’s what the Indian exporting community must grasp. In 2026, market access depends more on data than on duties. Every raw material category now faces this reality, whether it’s CBAM certificates for steel, EUDR geolocation for rubber, or REACH registration for chemicals.
The FTA provides a framework for easier compliance through mutual recognition of testing labs and technical dialogues on regulatory standards. For metal oxides and pigments, this means Indian certifications can now be accepted at European ports, reducing the cost of redundant testing and speeding up time to market. For minerals and ores, it creates cooperation frameworks on critical raw materials, ensuring Indian processors can access European high-tech refining machinery at zero duty.
The agreement also addresses strategic raw material categories like tungsten and molybdenum, where India serves as a key supplier for European defence and aerospace industries. Maintaining stable and predictable access to these specialized raw materials is as much about geopolitical reliability as it is about commercial competitiveness.
What’s Next?
The FTA is a strategic breakthrough that provides legal certainty, eliminates tariffs, and opens regulatory dialogues. But it’s also a challenge dressed as an opportunity. Smaller exporters without the resources to hire compliance specialists or invest in traceability systems may find themselves shut out, even with zero tariffs.
The next five years will separate those who see this agreement as a simple duty reduction from those who understand it as a fundamental restructuring of how raw material trade works in a climate-conscious, digitally-verified global economy. The winners won’t just be the cheapest suppliers. They’ll be the most transparent, most sustainable, and most adaptable ones.
By 2032, bilateral trade volumes are projected to double. The raw material categories that power this growth will be those that successfully navigate the twin demands of price competitiveness and compliance excellence. India’s raw material exporters stand at a crossroads, with the EU market offering unprecedented access for those willing to transform not just what they ship, but how they prove where it came from and how it was made.