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India signs FTA with EU

1

WHAT WE’RE TRACKING TODAY

THIS AFTERNOON: US links Russian oil to India tariff talks as Urals crude trades at wider markdown

Good afternoon, friends. A long-awaited trade pact is setting the scene for the India-MENA corridor this week amid rising geopolitical tensions.

The mother of all pacts has landed, as India and the EU finally inked a long-awaited FTA. We deconstruct the gains, concessions, and the long-term outlook with inputs from former IMF economist Charan Singh, who views the pact as a harmonizing counterpoint in an increasingly protectionist world.

Meanwhile, Washington is still keeping India on a short leash. US Trade Representative Jamieson Greer says New Delhi has “more ground to cover” on Russian oil before any tariff relief. Consequently, the 50% duties are here to stay, for now.

Over in Saudi Arabia, Indian construction giant L&T landed a major extension contract for the Riyadh Metro, as Indian construction firms solidify their presence in Gulf megaprojects.

All of that and more, below.

Watch this space

TARIFFS — India has more ground to cover to secure any tariff relief from the US, with US Trade Representative Jamieson Greer flagging continued concerns over New Delhi’s purchases of reduced-price Russian oil. While India has made “a lot of progress,” weaning off Russian barrels remains difficult given pricing incentives, Greer told Fox News.

Why it matters: Sustained pressure from the US could prompt Indian refiners to further slash Russian crude inflows, allowing a greater market share to MENA producers.

While India has slashed Russian crude imports to their lowest levels in years, the comments suggest any leeway to lower the 50% tariffs on Indian goods remains distant. Russian crude is expected to hold a significant share of India’s imports into 2026, complicating trade talks, Bloomberg reports, citing analysts.

“India is going to have a heyday with this,” Greer said, acknowledging India’s gains from the newly signed India-EU FTA through expanded market access and labor cost advantages. He framed Europe’s renewed push for globalization as a contrast to Washington’s more protectionist stance to fix problems attributed to it.


OIL WATCH — Russian Urals crude is trading close to its widest markdowns to dated Brent in Indian ports since 2022. February-loading Urals cargoes are being offered at a markdown of USD 10 / bbl, up to USD 5 / bbl cheaper compared to 2024, Reuters reports, citing trading sources.

Why it matters: Indian state-run refiners have been tilting back toward Middle East crude as US pressure over Russian purchases intensifies — meaning Gulf producers are closely watching Urals pricing shifts as they compete for a share in one of the largest oil demand centers globally.

Sanctions pressure: The wider markdowns follow Western sanctions targeting Russian energy exports and shipping, prompting sellers to lower prices to place barrels in Asia.

Refiner response: State-run Indian Oil Corporation, India’s largest refiner, has booked about 7 mn bbl of alternative crude for March loading, including supplies from Brazil’s Petrobras, to replace Russian volumes.


INFRASTRUCTURE — Mumbai-based engineering and construction giant Larsen and Toubro (L&T) secured a contract from the Royal Commission of Riyadh City to build the extension of Riyadh Metro’s Red Line, according to a company statement.

The project covers the design and turnkey delivery of an 8.4-km extension of the metro line spanning both elevated and underground sections as well as five metro stations which will be constructed by L&T’s heavy civil infrastructure business. Although the firm did not reveal the ticket size, it is classified by L&T in the major contracts category which are generally valued between USD 600 mn-1.2 bn.

Why it matters: L&T is a major engineering, procurement, and construction contractor in the Middle East executing projects across oil and gas, green hydrogen, power transmission, and civil infrastructure. The firm is also involved in the Neom city covering projects across renewable energy and grid infrastructure with contracts exceeding USD 2.7 bn.


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Data point

3k+ aircraft — that’s the cumulative order backlog held by the UAE, India, and Saudi Arabia with Airbus and Boeing, more than double the size of their current fleets, according to a statement from Avolon. Around 900 deliveries are expected over the next three years.

The global scene: While the aviation sector’s prospects are looking promising, thanks to persistent low fuel prices and growth from markets like the US, Europe, the Gulf, and India, a chronic undersupply of aircraft is weighing on the outlook. Airbus and Boeing’s total backlog now stands at more than 11 years, as the two — along with Embraer — saw 2k new orders last year. Going forward, the aircraft shortage is expected to lead to higher lease rates.

Still, the sector’s earnings are set to come in at USD 41 bn this year, which would make it the fourth year of gains as it looks to recover USD 182 bn in pandemic-induced losses.

Happening this week

India Energy Week is underway and will run through Friday, 30 January in Goa. Senior government officials including energy ministers are attending the event alongside India’s major trade partners, diplomats, and executives from energy majors such as Adnoc and Aramco. Prime Minister Narendra Modi inaugurated the event yesterday, inviting foreign investment into India’s energy sector.

We have a detailed update on Modi’s speech below.

The big story abroad

Global trade is dominating headlines for the second morning running after the EU and India signed a trade agreement. The move can be understood as a strategic buffer against volatile trade announcements by Washington. Markets will be closely watching US President Donald Trump’s reaction to the news.

Trump unfazed by USD slide: The greenback continued its slide on Tuesday, spurred on by comments made by Trump, indicating a lack of concern about the currency’s decline — “the USD is doing great,” he said in response to a question about the currency’s fall. The USD hit its lowest level in four years after a 1.3% dip yesterday, extending its 2026 losses to 2.6%.

AND IN MARKET NEWS- The S&P 500 closed at a fresh high yesterday, with investor optimism about the wave of upcoming Big Tech earnings fueling the rally. Meta, Microsoft, and Tesla will be out with their earnings today and Apple will follow suit tomorrow.

ALSO IT’S FED DAY- The US Federal Reserve will conclude its first policy meeting of 2026 today and markets are expecting a hold. Markets are also closely watching for Trump’s pick for Fed Chair Jay Powell’s replacement, with his nomination expected sometime this week.

WATCH THIS SPACE- Saudi Arabia yesterday said that it would not allow its airspace or territory to be used in an attack on Iran, Reuters reports. The news, delivered on a call between Crown Prince Mohammed bin Salman and Iran’s president, came a day after the UAE made a similar statement.

In context: Trump said last week that an “armada” was steaming toward Tehran.

Circle your calendar

Canada’s Prime Minister Mark Carney is likely to visit India in the first week of March as Ottawa steps up efforts to diversify trade ties beyond the US, Reuters reports, citing India’s High Commissioner to Canada. The visit is expected to focus on trade and investment, with potential agreements spanning energy, critical minerals, artificial intelligence, and nuclear cooperation, as both countries look to restart momentum on a long-stalled freetrade agreement.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays, and news triggers.

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THE BIG STORY TODAY

Finally here: An India-EU FTA, opening long-protected markets on both sides

India and the EU have finally inked a long-awaited freetrade agreement (FTA), with Prime Minister Narendra Modi announcing the signing, which affects a market made up of roughly 2 bn people, as per an Information Ministry press release. Leaders on both sides conceded to having delivered “the mother of all [agreements]” as each braces for trade tensions with the US.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

Among the biggest FTAs signed by India, the agreement slashes Indian tariffs on 90% of EU exports, with 30% going to zero immediately, delivering around EUR 4 bn in annual duty savings. Tariffs on imported automobiles will dip to 10% from 110% over five years, under quotas. Industrial goods from the EU including machinery (currently at 44%) and chemicals (at 22%) will see duties hit zero immediately.

In exchange, the EU will scrap tariffs on 90% of Indian goods at launch, expanding to 93% of goods within seven years, with concessions covering textiles, gems, chemicals, and marine products. India retains protections for autos and agriculture. Indian exporters stand to gain as the EU’s average tariff rate dips to 0.1% from 3.8%.

No carbon tax exemption for the subcontinent

India failed to secure any concessions on a carbon tax exemption, but a new technical group will now assist Indian firms in verifying their carbon footprints as the EU’s strict green rules took effect in January this year. India secured a limited zero-duty steel quota of 1.6 mtpa to the EU, roughly half of its recent shipment levels. This is part of the blocs’ move to halve overall no-tariff steel imports from third countries — steel exporters that are neither EU member states nor countries with preferential access like India, China, and Turkey.

Why this matters

The pact is a strategic hedge against the US’ trade volatility and diversifies supply chains away from China and US as both regions seek more predictable partners. The FTA covers economic zones adding up to 25% of global GDP and one-third of the global trade, Modi said. With talks delayed for nearly two decades, the pact opens up India’s massive yet closely protected consumer market to freetrade with the 27-nation bloc.

Former IMF economist’s view on the pact: A mutual victory

Harmonizing, not weaponizing, trade: With this pact, India and the EU are moving away from the “weaponization of trade” increasingly seen in Washington, Charan Singh, CEO of Egrow Foundation and former senior economist at the IMF, told EnterpriseAM.

Anti-protectionist stance: Singh views the pact as a vital anti-protectionist strategy that provides necessary market diversification for both parties in a “gloomy world” of geopolitical uncertainty and eroding trust. Geopolitically, the agreement is the EU’s experiment with an alternate supply chain in a gradual pivot away from China, Singh said.

For India, the gains are concentrated in labor-intensive and high-tech industries. Beyond the immediate victories for textiles, pharma, and gems, Singh expects the pact to stabilize export growth by tightening technology and investment ties with Europe.

The EU’s looming carbon border tax could dampen gains by roughly 30%, according to Singh, with its complete implementation slated for 2026. However, he maintains a “mutual victory” outlook, underlining the spirit of the agreement to prompt a review of the carbon tax and all commodities covered under it. He urged a pragmatic approach given Europe’s own energy constraints.

Logistics hubs in the UAE and Saudi Arabia are positioned to gain as “switchyards” between Asia and Europe. As firms re-optimize supply chains and look for better alternatives to bypass risks in the Red Sea, some ports in India and MENA could benefit, stated Singh.

Addressing the deficit: India’s trade with the EU transformed from a near-zero balance in 2019-2020 to a USD 15.2 bn surplus in 2024-25. The phased tariff easing under the India-EU FTA is designed to avoid a sudden import surge, giving both sides time to adjust and reduce the risk of India’s trade surplus widening sharply, Singh told us.

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ENTERPRISE EXPLAINS

Why India’s customs execution will matter more than tariffs reductions for Gulf trade

India is preparing a comprehensive customs revamp in the upcoming budget for FY 2026-27 (begins in April), a move Finance Minister Nirmala Sitharaman has flagged as the government’s next big reform. While the headline goal is simplifying duties, for Gulf traders operational bottlenecks such as delayed customs clearances, certificate of origin, and tighter customs inspections remain a challenge.

India’s merchandise trade has crossed USD 1.16 tn in FY 2024-25, and nearly 29% of GDP moves through customs clearances — meaning even small frictions can translate into higher costs and delays across the economy, according to a Global Trade Research Initiative (GTRI) report (pdf).

Those frictions are most visible in Gulf-linked trade flows. “For Gulf exporters, the real friction today is time and predictability at Indian ports, not market access,” Ajay Srivastava, trade expert and founder of GTRI told EnterpriseAM, adding that “once tariffs are removed, the friction shifts from price to process.”

The implications of the customs processes are more visible along the USD 100 bn India-UAE trade corridor. As trade volumes under India-UAE are projected to increase to USD 200 bn by 2032, customs processes increasingly determine landed costs, delivery timelines, and dispute risk.

From tariff liberalization to execution risk

Close to 90% of tariff lines have zero duty under the comprehensive economic partnership agreement (CEPA) with Oman and the UAE, giving exporters from the region a clear pricing advantage over non-FTA countries. But that tariff differential has also increased scrutiny at the border. “When most favored nation tariffs are still 15-20% but FTA rates drop to zero, customs officers understandably apply closer scrutiny which often translates into slower clearances,” Srivastava said.

These delays can affect delivery schedules, inventory cycles, and financing costs even when documentation is in order for traders, particularly those operating through UAE-based trading and re-export hubs.

Rules of origin under CEPA have become a key friction point as customs authorities tighten enforcement to prevent misuse of lower tariffs, “Rules of origin enforcement is a cat-and-mouse game globally,” Srivastava told EnterpriseAM. “The problem arises when legitimate enforcement translates into delays.”

In India, origin verification can result in consignments being held for extended periods, even when documentation is in order. “The balance needs to shift toward risk-based, time-bound enforcement,” he said, arguing for faster and predictable clearances.

Where it hits hardest: Gold, chemicals, and machinery

The friction is most visible in high-value and high-volume flows in sectors where Gulf trading hubs play a central role.

The UAE accounted for 18% of India’s gold and silver imports in FY 2023-24. These high-value consignments are particularly exposed delays linked to origin certification. While energy imports are protected by long-term contracts, emerging non-oil goods such as chemicals and machinery also face daily disruptions in customs, despite lower tariff barriers.

Why predictable customs governance matters

“For Gulf traders, who tend to be well-capitalized and professionally organized, customs uncertainty matters more than duty rates,” Srivastava told us. One underutilized tool is advance rulings on classification and valuation of goods. Wider use of such rulings could eliminate uncertainty upfront, reducing disputes and shipment delays once goods arrive at Indian ports.

“The next signal of seriousness is faster clearance and procedural certainty,” as tariff barriers are largely already resolved. Srivastava said. This would require wider use of risk-based inspections, clearer timelines for FTA shipments, and fewer discretionary interventions at the border. “If India can ensure that FTA shipments clear in hours rather than days, it would materially improve India’s attractiveness as a trading partner for the Gulf,” Srivastava said.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

4

ENERGY

Modi targets USD 500 bn in oil and gas investment by 2030 signaling a window to Gulf allocators

India is positioning itself as a global investment destination in the oil and gas sector, signaling a window for Gulf SWFs and national energy companies. The country is targeting USD 500 bn in total energy investment, with USD 100 bn specifically earmarked for the oil and gas sector by 2030, Prime Minister Narendra Modi said during an address at India Energy Week.

Why it matters: As Western majors pivot toward green energy, India is aggressively expanding its fossil fuel infrastructure, aiming to increase refining capacity to 300 mtpa from 260 mtpa as it looks to secure a top position globally in terms of refining capacity. This reinforces the India-MENA corridor’s significance as an important axis for global hydrocarbon demand.

UAE Industry Minister Sultan Al Jaber confirmed the scale of the prospect, noting that India has become a “decisive driver” of global energy demand during his speech at the event. He flagged three critical demand signals for Gulf suppliers: India’s air travel will jump 150% in 15 years, data center capacity will increase 10-fold, and the number of air conditioners will explode, with 10 new units sold every second globally by 2050.

India has set a firm target to meet 15% of its total energy demand through natural gas by 2030, up from the current 6.7%. To hit this, Modi stressed that India requires a vast pipeline network along with construction of LNG terminals and increased regasification capacity at ports. The government projects that natural gas consumption will grow nearly 60% by 2030, primarily driven by the expansion of City Gas Distribution networks — a sector Modi flagged as “highly attractive” for foreign investment.

Regulatory de-disking: The government has sweetened the offer by operationalizing the Oilfields Amendment Act 2025 — a reform which strips away complex mining leases in favor of a streamlined lease system in the oil and gas sector designed to de-risk foreign investments.

India is also targeting to expand the scope of its oil and gas exploration to 1 mn sq km by 2030 with more than 170 exploration blocks allocated in the Indian Ocean’s Andaman and Nicobar basin. “If you invest in India’s exploration sector, your company’s profitability is bound to improve,” Modi said.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

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ALSO ON OUR RADAR

Adani Defence links up with Embraer to localize aircraft manufacturing in India

Adani Group makes early moves in aircraft manufacturing

Indian conglomerate Adani Group’s defense arm, Adani Defence and Aerospace, signed an agreement with Brazil-based aircraft manufacturer Embraer to explore building a regional transport aircraft manufacturing ecosystem in India — a move aimed at positioning India as a manufacturing base for aircrafts amid global delivery bottlenecks, according to a company statement.

The details: The proposed collaboration follows a phased approach, beginning with aircraft assembly in India and moving toward localized manufacturing of components and systems.

Why it matters: This partnership is geared towards enhancing India’s domestic supply chain. As Airbus and Boeing delivery slots stretch years out, smaller aircraft manufacturers such as Embraer could emerge as faster options for airlines, including Gulf carriers feeding traffic into Middle East hubs. A local assembly base would strengthen India’s leverage in a tight global aircraft market and deepen its role in the Asia-Middle East aircraft supply chain.

IN CONTEXT- Adani Defence and Aerospace has been expanding across aviation infrastructure, defense manufacturing, and pilot training with the Embraer agreement marking its first move into commercial aircraft manufacturing.

South Africa weighs higher tariffs on Indian vehicle imports

South Africa is considering raising import duties on fully built passenger vehicles from India and China to 50% from the current 25% Bloomberg reports. The move could affect Indian automakers including Mahindra and Mahindra, Tata Motors, and Maruti Suzuki India, which export India-built vehicles across Africa and Middle East markets.

The proposal is part of an internal review by South Africa’s Trade, Industry, and Competition Department aiming to protect the country’s domestic auto industry. Vehicles manufactured in India accounted for nearly 38% of passenger cars sold in South Africa in the early months of 2025.

6

PLANET FINANCE

Goldman Sachs CEO sees resurgence in global capital markets in 2026

Goldman Sachs Chairman and CEO David Solomon shared a broadly optimistic outlook for the global economy in 2026, citing a “constructive” macro environment driven by AI infrastructure investment, regulatory shifts, and continued fiscal stimulus, he said on the Exchanges podcast (listen, runtime: 22:08). Despite lingering geopolitical “noise” and a fragile US labor market, Solomon anticipates a potentially record-breaking year for M&As and a strong IPO pipeline.

What to expect

M&A set to accelerate in 2026: This year’s M&A activity could surpass the strong levels seen in 2025, Solomon said, calling 2026 potentially “one of the best M&A years ever.” Drawing on Goldman Sachs’ transaction backlog and client engagement, he said corporate sentiment remains solid, with transaction flow likely to continue, barring major external surprises. The shift to a more permissive regulatory tone has also helped encourage dealmaking after years of rejections.

The outlook for IPOs is also improving, fueled by stronger private equity activity and portfolio valuations that are aligning more closely with the market, Solomon said. He noted that some large private companies that previously delayed listings are now reconsidering going public. While issuance is unlikely to reach the 2021 peak, he expects IPO activity to continue the steady recovery seen in 2025.

Behind the scenes

Policy support and AI investment underpin growth: The global macro environment remains supportive for markets and risk assets heading into 2026, particularly in the US, Solomon argues. He pointed to a combination of sustained fiscal stimulus, monetary easing following 100 basis points of rate cuts in 2025, a more business-friendly regulatory environment, and a major capital investment boom driven by AI infrastructure.

Risks on the horizon: Solomon cautioned that policy uncertainty from Washington and global geopolitical tensions remain the main risks, citing a “shotgun approach” that unsettles business leaders. He pointed to recent headlines on Greenland and European tariffs as potential triggers for market pullbacks. Still, the outlook remains positive barring a major exogenous shock (like a pandemic or a major cyber incident), highlighting technology-driven productivity gains as a key support for investors.

Zooming out

The gap is widening between the US, Europe, and China. The US benefits from a strong “innovation economy” and efficient capital markets, Solomon argued, with a USD 30 tn economy and 2% trend growth. Europe, by contrast, is a USD 20 tn economy of 450 mn people with sub-1% growth and slow progress on reforms, with only 11% of the Draghi plan for economic reform implemented. In China, equity markets rose 60-80% over the past year, but the underlying economy remains sluggish despite eased US tensions.

MARKETS THIS MORNING-

The mood hasn’t shifted all week long — the anticipation of a wave of Big Tech earnings and the Fed’s rate decision are giving investors reason to stay optimistic. Asia-Pacific markets were mostly in the green in early trading this morning, with the Kospi leading gains.

Sensex

81,914

+0.07% (YTD: -3.4%)

NIFTY 50

25,251

+0.30% (YTD: -3.4%)

ADX

10,383

+0.2% (YTD: +3.6%)

DFM

6,502

+0.5% (YTD: +7%)

Tadawul

11,425

+0.38% (YTD: +8.9%)

EGX30

48,028

+0.4% (YTD: +15%)

Boursa Kuwait

8,131

-0.6% (YTD: -1.7%)

QSE

11,354

+0.6% (YTD: +4.8%)

S&P 500

6,978

+0.4% (YTD: +1.9%)

FTSE 100

10,193

-0.14% (YTD: +2.7%)

Euro Stoxx 50

5,987

-0.1% (YTD: +3.5%)

Brent crude

USD 67.73

+0.2%

Natural gas (Nymex)

USD 3.66

-5%

Gold

USD 5,270

+1.7%

BTC

USD 88,857

+1.1%

The values in the table above are listed according to the market position as of 3:30pm IST / 2pm GST.


JANUARY

27-30 January (Tuesday-Friday): India Energy Week, ONGC Advanced Training Institute, Goa.

30-31 January (Friday-Saturday): India-Arab Foreign Ministers’ Meeting, New Delhi.

30 January-1 February (Friday-Sunday): India Agri Expo, Ludhiana Exhibition Centre, Punjab.

31 January (Saturday): Commencement of Budget Session 2026, Parliament of India, New Delhi.

FEBRUARY

1 February (Sunday): Union Budget 2026-27, Parliament of India, New Delhi.

2-8 February (Monday-Sunday): IndOman International Film Festival, Muscat.

3-6 February (Tuesday-Friday): ChemTECH World Expo, Jio World Convention Centre, Mumbai.

9-10 February (Monday-Tuesday): Pune International Business Summit (PIBS), SL Kirloskar Convention Center, JW Marriott, Pune.

14-18 February (Saturday-Wednesday): IHGF Delhi Fair (Spring), New Delhi.

16-20 February (Thursday-Friday): India-AI Impact Summit, Bharat Mandapam, New Delhi.

25 February (Wednesday): World Sustainable Development Summit, Taj Palace, New Delhi.

MARCH

4 March (Wednesday): Holi.

12 March (Thursday): ET Entrepreneur Summit & Awards, Bengaluru.

19-22 March (Thursday-Sunday): Bharat Urja Manthan – Global Energy Conclave, New Delhi.

20 March (Friday): Eid Ul-Fitr.

23-25 March (Monday-Wednesday): Indiasoft: International IT Exhibition & Conference, New Delhi

23-25 March (Monday-Wednesday): Smart Cities Expo, Bharat Mandapam, New Delhi.

23-25 March (Monday-Wednesday): Plastiworld India, Jio World Convention Centre, Mumbai.

31 March (Tuesday): Mahavir Jayanti.

Signposted to happen sometime in March 2026

  • Election Commission of India is expected to announce polling dates for elections in the states of Tamil Nadu, Kerala, West Bengal, Assam, and the union territory, Puducherry.
  • Canadian Prime Minister Mark Carney’s visit to India.

APRIL

3 April (Friday): Good Friday.

23-25 April (Thursday-Saturday): Rail & Metro Technology Conclave, Bharat Mandapam, New Delhi.

29 April-2 May (Wednesday-Saturday): Bharat Buildcon, Yashobhoomi, Dwarka, Delhi.

7-10 April (Tuesday-Friday), India Rubber Expo, ITPO, Pragati Maidan, Delhi.

MAY

1 May (Friday): Buddha Purnima.

26 May (Tuesday): Eid Ul-Adha.

JUNE

24-25 June (Wednesday-Thursday): India Homeland Security Expo, Bharat Mandapam, Pragati Maidan, New Delhi.

26 June (Friday): Muharram.

Signposted to happen sometime in 1H 2026:

AUGUST

15 August (Saturday): Independence Day.

26 August (Wednesday): Prophet Mohammad’s Birthday.

OCTOBER

2 October (Friday): Gandhi Jayanti (Mahatma Gandhi’s Birthday).

20 October (Tuesday): Dussehra.

NOVEMBER

24 November (Tuesday): Guru Nanak Jayanti.

DECEMBER

8-11 December (Tuesday-Thursday), Expand North Star, Dubai.

25 December (Friday): Christmas Day.

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