EU-India Trade Paradigm and the Post-Regime 42 Fiscal Landscape

The signing of the landmark EU-India Free Trade Agreement (FTA) on January 27, 2026, marks the beginning of a historic chapter for global commerce. As leaders of the world’s second and fourth largest economies, we are witnessing the birth of a free trade zone encompassing 2 billion people, a move that provides a vital strategic hedge against the rising tides of global protectionism. 

For our partners and clients, this is more than a policy shift, it is a fundamental restructuring of the supply and demand fundamentals that will define the next decade of growth.

The Macro Perspective

This agreement is expected to double European goods exports to India by 2032, a surge driven by the elimination or reduction of tariffs on 96.6% of trade value. We anticipate bilateral trade to swell by up to 65%, effectively creating permanent efficiency gains through regulatory alignment. 

Beyond the immediate growth, the FTA serves a critical geopolitical purpose by facilitating a 5 to 9% trade diversion away from China, directly supporting the "de-risking" strategies of European firms and the supply chain diversification goals of Indian industry.

Commodity Dynamics and Pricing Shifts

The "mother of all deals" has unlocked sectors that were previously guarded by prohibitive barriers. Our analysis identifies several key areas where pricing and demand will shift immediately

• Industrial Powerhouses Tariffs on machinery and electrical equipment, previously as high as 44%, are being eliminated. Similarly, chemical and pharmaceutical duties, once reaching 22% and 11% respectively, are largely removed, offering Indian generic manufacturers a significant competitive boost in the European market.
• The Agri-Food Revolution: India has granted unprecedented access to its rapidly growing consumer class. Indian tariffs on European wines drop from 150% to 75% at entry, with a roadmap to reach 20%. Olive oil duties will vanish over a five year period, while processed agricultural products like chocolate and pasta become duty-free.
• Textiles and Fashion: The elimination of 8 to 12% EU tariffs allows Indian apparel and leather products to compete on equal footing with duty-free neighbours like Vietnam and Bangladesh. This is a transformative moment for a sector that employs over 100 million people in India.
  

Strategic Exclusions We must note that for the protection of European farmers, tariffs on beef, sugar, rice, and ethanol remain firmly in place.

The Fiscal Pivot; The End of Regime 42

While the FTA removes traditional trade barriers, a new fiscal reality has emerged as of January 1, 2026. The abolition of "Regime 42" in France and Spain means that non-EU entities can no longer utilize simplified one-off fiscal representation for Delivered Duty Paid (DDP) shipments. 

For Indian SMEs, this is a critical hurdle, the requirement for a permanent VAT and EORI identity is no longer optional but a prerequisite for market entry. This change introduces a potential 20 to 21% cash flow burden on every shipment. 

The FTA is a bridge to unprecedented growth, but the fiscal reforms of 2026 are the foundation upon which that bridge must be built. Market leaders are no longer relying on "transactional" shipping; they are building Native European Fiscal Identities. Failure to adapt to the post-Regime 42 environment will result in immediate shipment seizures and a loss of the competitive edge provided by the new treaty.

At GrainFuel Nexus® , we manage this through Postponed VAT Accounting ion France as the EU gateway, turning a potentially crippling tax into a neutral bookkeeping entry and ensuring your goods clear the "Green Lane" without delay.

Management Strategy and Digital Readiness

Success in this new era requires more than just competitive pricing, it demands technical and digital fluency. The transition to "REX-2" means that self-certification is now the only legitimate route to 0% duties. 

Furthermore, the implementation of Digital Product Passports and the upcoming Carbon Border Adjustment Mechanism (CBAM) financial adjustments starting in 2026 add layers of regulatory complexity that must be managed with precision. 

We recommend our partners move beyond transactional thinking and establish a native European fiscal presence immediately. 

The FTA offers a massive competitive advantage, but that advantage belongs only to those who have mastered the new digital and fiscal architecture of the European Union.

GrainFuel Nexus – Market Intelligence Division - End of Report – 13 February, 2026

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This is a general market analysis for informational purposes only and does not constitute financial or professional advice. The author assumes no liability for any actions taken based on this information.