EU-India FTA may boost India’s competitiveness in some sectors, says EY report on European economic outlook
The EY European Economic Outlook (March 2026) notes that changes in trade policy, tariffs and geopolitical uncertainties continue to shape economic prospects in Europe, potentially affecting global trade flows and competition with countries such as India.
The report highlights that the recently announced EU-India Free Trade Agreement (FTA) could have mixed sectoral consequences for European industries, while creating competitive pressure in some segments.
“In this edition of the outlook report, we also examine the recently announced EU-India Free Trade Agreement. While the overall macro impact on Europe is negligible, sectoral impacts are slightly more significant,” the report said. The statement was included.
Some European industries may face stronger competition from India, he added. “For example, the mining sector may benefit from improved access to production inputs, while the clothing sector may face stronger competitive pressure from Indian manufacturers,” the report said.
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The report also stated that global trade tensions are a significant negative for the European economy. According to EY, it was stated that the customs duties imposed by the USA could negatively affect economic growth throughout the European Union. The report stated that “Tariffs will reduce EU GDP growth by 0.5 points in 2026, and the most negative effects will be concentrated in Ireland and the Scandinavian countries.”
Despite these challenges, the euro area economy is expected to continue growing, albeit at a moderate pace. EY expects euro area growth to ease slightly in the short term before gradually recovering.
“Euro area growth is expected to slow from 1.5% in 2025 to 1.3% in 2026… Growth should accelerate again to 1.4% in 2027 and 1.5% in 2028-29,” the report said.
The outlook also warns that geopolitical tensions in the Middle East could impact global energy prices and economic activity.
The report estimates that such developments “could increase euro zone inflation by 0.3 percentage points and reduce GDP by 0.2% in 2026,” while a major disruption such as the blockade of the Strait of Hormuz could have much greater economic consequences.
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At the same time, structural factors such as an aging population and labor shortages could also weigh on Europe’s long-term growth prospects. EY said that “labor supply has become a permanent drag on the growth trend”, particularly in parts of Central, Eastern and Southern Europe.
However, the report emphasized that investments in new technologies such as artificial intelligence could increase Europe’s productivity and economic output in the next decade.
The report stated, “Artificial intelligence could increase Western Europe’s GDP by up to 4% by 2033,” but also warned that Europe risks falling behind the United States in artificial intelligence investments.
For India, the report suggests that deeper trade relations with Europe and increased competitiveness in sectors such as textiles could create opportunities as global trade uncertainties continue to shape the economic outlook.
