Market Radar India: EU trade deal, budget outlook, and record retail leasing

Geopolitical Spotlight

The EU Pivot

In a move described by European Commission President Ursula von der Leyen as the "mother of all trade deals", India and the European Union (EU) have concluded a historic Free Trade Agreement (FTA) that promises to reshape the economic corridor between the two giants.

Sealed in New Delhi on Tuesday, January 27, 2026, the pact concludes nearly two decades of on-and-off negotiations and creates a free trade zone of two billion people, accounting for a quarter of global GDP.

The geopolitical catalyst for this acceleration is unmistakable. As the global trading order fractures, both Brussels and New Delhi have sought shelter from the protectionist "trade blitz" of US President Donald Trump, who recently imposed 50% tariffs on Indian goods and threatened European allies over the Greenland dispute.

Analysts view this alignment not merely as commercial, but as a strategic anchor for the 21st-century order, allowing India to decouple from unreliable partners and diversify beyond its dependency on the US and China.

The economic implications are vast. The deal will eliminate or reduce tariffs on 96.6% of EU exports to India, saving European exporters an estimated EUR 4 billion annually and potentially doubling shipments to the subcontinent by 2032.

In return, more than 99% of Indian exports - worth approximately USD 75 billion - will gain preferential entry into the EU, providing relief to Indian exporters grappling with steep US baseline tariffs.

What’s Next? The deal must now undergo legal vetting and ratification by the European Parliament, EU member states, and the Indian cabinet - a process expected to take about six months.

India at Davos

At Davos 2026, the narrative on India shifted decisively from "if" to "when" as Union Minister Ashwini Vaishnaw declared India’s rise to the world’s third-largest economy a "certainty" in the coming few years.

This sentiment was echoed by the IMF’s Gita Gopinath, who noted that the milestone is expected around 2028. However, the focus has moved beyond rankings to execution. 

Policymakers highlighted the removal of 1,600 old laws and over 35,000 compliance burdens as evidence of a modernised legal framework.

The challenge now, according to Gopinath, is not GDP size but raising per capita incomes and solving the mismatch between job creation and workforce skills.

Policy Radar

Union Budget 2026

With the Union Budget for the 2026-27 fiscal year approaching, the government is expected to double down on housing and infrastructure as the twin engines of domestic resilience.

Expectations are particularly high for a revised definition of affordable housing and improved credit access, measures designed to bridge the persistent demand-supply gap.

Concurrently, infrastructure allocations are likely to prioritise the development of multimodal logistics parks, 100% rail electrification, and port-linked manufacturing clusters, all aimed at enhancing broader supply-chain efficiency.

To further strengthen the "Make in India" initiative, the budget may extend the 15% concessional corporate tax rate for new manufacturing units, while stricter enforcement of payment rules is anticipated to ease liquidity pressures for Micro, Small and Medium Enterprises (MSMEs).

A significant push for future-proofing the economy is also expected, with potential fiscal incentives for AI clusters, data centres, and green buildings. These proposals may include the creation of a "green finance fund" specifically to mobilise capital for EV corridors and renewable energy projects.

Sector Watch

The Retail Boom

India’s commercial landscape is witnessing a robust revival, headlined by a massive comeback in the retail sector.

Gross leasing soared 54% in 2025 to hit a three-year high of 12.5 million square feet. Domestic brands remained the backbone of this expansion, accounting for 82% of all leasing, though international interest is intensifying with the entry of 29 new foreign brands - the highest number in five years.

Interestingly, high streets have edged out shopping malls, commanding 48% of the leasing share compared to malls' 45%, as Direct-to-Consumer (D2C) brands aggressively pivot to physical stores.

While fashion and apparel continue to lead the pack with a 34% share, the Food & Beverage (F&B) segment is rapidly gaining ground, now capturing 20% of the market.

Delhi NCR, Bangalore, and Hyderabad remain the primary engines of this growth, collectively accounting for 71% of total leasing activity.

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Look out for a new edition of the GRI Institute's Market Radar India next week!