EU–India Chemical Trade: Concentrated trade, Category-Specific Deficits, and Emerging Opportunities

Chemicals: Expanding Exports, Generating Employment
The India–EU Free Trade Agreement (FTA) ensures zero duty on 97.5 per cent of India’s chemical export basket by value, eliminating tariffs of up to 12.8 per cent. This preferential access is expected to:

• Boost India’s competitiveness across organic, inorganic, and agrochemical segments.
• Strengthen MSME-led clusters and promote high-value, technologically advanced, and sustainable chemical products.
• Position India as a trusted supplier to Europe’s nearly ₹43.57 Lakh Crore ($500 billion) chemical import market.

Mines and Minerals: Zero-duty access across all tariff lines removes cost barriers, enabling India to export high-quality, value-added minerals to Europe. Long-term market access strengthens partnerships in steel, electronics, automotive, and renewable energy sectors.

Plastics and Rubber: India’s plastic and rubber industries gain preferential access to a market worth ₹27.67 Lakh Crore ($317.5 billion), complementing India’s current exports of ₹20.9 thousand Crore ($2.4 billion). Enhanced access, combined with a skilled manufacturing workforce and MSME innovation, promises higher employment, export growth, and an improved global trade profile.

Organic Chemicals: Stabilisation and Targeted Growth

Key Drivers for 2026–2027

• Compliance and Supply Chain Alignment: Indian exporters are expected to stabilise shipments to meet EU standards, particularly in acyclic hydrocarbons and phenols.
• Market Recovery in Cyclic Hydrocarbons: After a sharp deficit in 2025, targeted investments in production and logistics may slowly increase India’s share in the EU market.

Source: ALCHEMPro

• Overall Trade Balance: Organic chemicals are close to balanced, with slight deficits in cyclic hydrocarbons and phenols, and near parity in acyclic hydrocarbons.

Opportunities under FTA

• Acyclic Hydrocarbons: Early-stage export growth expected in solvents, alcohols, and intermediates.
• Cyclic Hydrocarbons and Phenols: FTA can boost competitiveness via zero-duty access, encouraging domestic production of specialty derivatives.

Strategic Focus

• Prioritise MSME clusters producing high-value organics for EU markets.
• Ensure REACH and EU compliance to capture volume growth and value-added opportunities.
• Develop derivatives and specialty chemicals to reduce trade deficits in cyclic hydrocarbons and phenols.

Inorganic Chemicals: Import Dependence and Selective Surplus

Key Drivers for 2026–2027

• High Import Dependency: EU continues to dominate supplies for carbon blacks, rare-earth/precious metal compounds, and nitrites/nitrates.
• Industrial Demand Growth: Sectors like electronics, automotive, renewable energy, and specialty coatings will sustain EU imports from India.

Source: ALCHEMPro

Observation

• Carbon blacks and nitrites/nitrates remain import-reliant, emphasising structural EU dependency.
• Zinc oxide shows potential for incremental surplus due to Indian MSMEs scaling high-value exports under zero duty.
• FTA-driven market access will encourage India to focus on high-value, quality-controlled inorganic chemicals, leveraging EU demand in electronics and specialty industries.

2026–2027 India–EU Chemical Market Outlook Summary

2026 – Positioning Year

• Supply Chain Alignment: Indian chemical manufacturers focus on aligning production processes, quality assurance, and regulatory compliance with EU standards, including REACH, safety, and sustainability requirements.
• Export Stabilisation: Organic chemical exports maintain steady volumes, with early-stage price competitiveness emerging in acyclic hydrocarbons, phenols, and solvents. Inorganic chemical imports from the EU remain dominant, reflecting ongoing EU deficits.
• Early FTA Benefits: Initial impact of zero-duty access is observed through improved margins for Indian exporters, particularly in labour-intensive and specialty chemical MSME clusters.

2027 – FTA Impact Materialises

• Organic Chemicals: Moderate growth in exports of acyclic hydrocarbons, alcohols, and phenolic compounds, driven by enhanced EU market access and tariff elimination.
• Cyclic Hydrocarbons: Gradual recovery reduces previous EU trade deficits, with niche specialty cyclic showing stronger demand.
• Inorganic Chemicals: Structural deficits in EU markets persist for major inorganic chemicals; exceptions include zinc oxide, which may achieve a mild surplus. Export growth focuses on high-value, specialty inorganics such as nitrites, nitrates, and carbon blacks.
• Market Positioning: India consolidates its role as a reliable supplier for targeted chemical categories, including organics, specialty inorganics, agrochemicals, and polymers.

Strategic Implications

1. MSME Cluster Focus: Prioritise support for MSMEs producing high-value, export-oriented chemicals, leveraging FTA preferential access to scale operations.

2. Domestic Production Investment: Enhance local capacity for carbon blacks, specialty inorganic salts, and nitrates/nitrites, reducing dependency on EU imports and ensuring sustainable supply chains.

3. FTA Leverage: Utilise zero-duty access to build long-term partnerships with European manufacturers, capturing both volume growth and higher value-added opportunities.

4. Compliance and Standards: Align production and quality systems with EU regulatory frameworks to ensure products meet safety, environmental, and traceability standards, maximising market access and competitiveness.