India is becoming more central to European and UK delivery models. It is still a sourcing location, but it is also a growth market and, increasingly, a strategic partner. UK. Recently there has been a lot in the news since the three India trade deals announced throughout January 2026.
Three tracks matter in 2026:
- The UK–India FTA, which UK buyers are likely to feel first
- The EU–India agreement, which could be bigger in scope but slower to land in practice
- A US–India trade pact, which can pull investment and tighten talent markets globally
India’s Central Government budget, that was just presented, points in the same direction, with more emphasis on infrastructure and AI capacity.
What’s changed, and why it matters
Primarily based on Donald Trump’s tariffs, trade policy is no longer just background noise. It affects day-to-day decisions such as:
- How quickly suppliers can scale teams in India
- Where investment flows, and where skills get pulled
- What buyers expect around data, security, audit evidence, and AI governance
- Commercial pressure on pricing, competition, and contract terms
For organisations buying software services, or AI solutions, the shift may be gradual, but the direction is not.
UK–India FTA: what UK buyers may notice first
The UK Free Trade Deal – The UK briefing material describes tariff reductions and phased changes over time. Public reporting in January 2026 suggested entry into force could be in the first half of 2026, subject to legal and ratification steps.
Why it matters in technology procurement
- UK–India delivery becomes more “standard” across supply chains, including sub-contractors
- Procurement teams push harder for clarity on: who accesses data, where it is processed, which tools are used, and what evidence exists
- As volume rises, scrutiny rises too: continuity, redundancy, onboarding speed, and incident readiness
EU–India agreement: bigger shift, slower start
The European Commission has presented the EU–India agreement as broad and economically significant. It has been labelled “The mother of all deals” since it will affect the lives of 2 billion people.
While it is easy to assume the agreement was triggered by Donald Trump’s tariffs, the negotiations long pre-date that: they began in 2007, were suspended in 2013, and were relaunched in 2022. By early 2025, before Trump initiated the tariffs, both sides were already talking openly about speeding things up, with an aim to wrap up by the end of 2025. That deadline slipped, but the push was clearly in place before the later tariff drama. However, to be fair, wider trade tensions may still have added a bit of urgency towards the end.
The Kiel Institute for the World Economy has published modelling that suggests large effects under certain scenarios. In a comprehensive FTA scenario, it estimates Indian exports to the EU could rise by about 41%, and EU exports to India by about 65%.
In practice, agreements of this scale usually involve legal finalisation and several approval steps. That means phased implementation, not an overnight switch.
Why this also matters to UK firms
Even outside the EU, many UK companies:
- Sell into the EU
- Sit inside EU supply chains
- Align with EU compliance expectations to keep one operating model
As EU–India trade grows, European competitors and partners may deepen their India footprint. That can affect pricing, timelines, talent availability, and delivery expectations in the UK too.
US–India trade pact: second-order effects that reach Europe
Reuters reporting in early February 2026 said India expected a US–India trade agreement to be signed in March 2026, with tariff reductions and purchase commitments.
What this can change for UK and European buyers
- More global demand for India-based capability, even if you never sell to the US
- Tighter talent markets, sometimes quickly, especially in cloud, security, data engineering, AI engineering, and test automation
- More pressure on governance maturity where AI is involved
India’s 2026–27 budget: capacity and infrastructure
India’s budget messaging has emphasised growth in digital infrastructure and AI-related capacity, including positioning for cloud and AI data centres, plus ongoing work around semiconductors.
The practical takeaway is not “cheap compute”. It is more domestic capacity, more reliability, and more platform maturity. That shapes how global firms build and run operations involving India.
One more signal of intent: New Delhi hosts the India AI Impact Summit at Bharat Mandapam on 16–20 February 2026, billed by organisers and official releases as a major global gathering, with senior government figures and many of the best-known AI leaders and firms attending. Representatives from our company will also be there.
India as a market, not just a delivery hub
India is also becoming a larger end market. Reuters has reported India’s official FY 2026–27 growth outlook in the high-6% to low-7% range. The IMF likewise projects India among the faster-growing major economies. India’s high growth rate compared to the rest of the world has impact. Most analysts assumes that India will overtake Germany as the third largest economy sometimes between 2027-2029. In Purchasing Power Parity (PPP$) it is already the third largest economy.
That tends to show up in business choices:
- Product roadmaps include “India requirements” earlier
- Partnerships and delivery hubs are built with a longer time horizon
- Vendor ecosystems deepen, with more specialisation and better tooling
What this means in practice for software and IT services
1) Contracting and supplier checks will tighten
Expect more questions on:
- Audit rights and evidence (security controls, access logs, training records)
- Sub-processor transparency
- Incident reporting and response maturity
2) Data architecture matters more
More organisations are moving towards patterns such as:
- EU-hosted core data, with tightly controlled processing elsewhere
- Clear separation between production data and development or test
- Sharper “data boundaries” across systems and teams
3) AI moves from demos to controlled pilots
Buyers increasingly want:
- Clear scope and success criteria
- Human review where it matters
- Logging, monitoring, and cost guardrails
- A plain answer to: what data touches which model
Timing at a glance
- UK–India FTA: public expectation of entry into force in first half of 2026, subject to legal and ratification steps
- EU–India agreement: announced, with phased entry into force after procedural steps on both sides
- US–India pact: reporting points to a March 2026 signing target, with details dependent on the final structure
Frequently Asked Questions on the India trade deals
Will the India trade deals affect IT services?
Not directly. However, indirectly the bigger effect tends to be scale and investment, which can improve capacity and speed. Pricing depends on skills demand, scope clarity, delivery risk, and contract structure.
Will India-based delivery become easier?
Over time, yes, especially for commercial and operational set-up. But expectations around data handling, security controls, auditability, and AI governance are rising, not falling.
Do these deals change GDPR or UK data protection duties?
No. The obligations remain the same. What changes is the volume and complexity of cross-border work, so it becomes more important to define data boundaries clearly and strengthen supplier controls.
What should we ask vendors about AI usage in delivery?
At minimum:
- which AI tools are used in delivery
- what data is fed into them
- whether tools are configured to avoid training on your data
- what is logged and what evidence can be provided
- where human review happens
How can we reduce risk if suppliers use AI tools?
Start with clear rules about what data can be used, require documented tool configurations, and ensure there is a review process for sensitive work. Ask for audit trails that show how outputs were produced and checked.
What should we do in the next few months if we buy IT services from India?
- refresh supplier due diligence questions, including AI governance
- review how sensitive data flows through delivery processes
- plan for talent and price volatility in a few key skill areas
- prioritise work that reduces integration complexity and vendor lock-in
Which skills are most likely to see price volatility?
Typically the areas where demand spikes quickly: cloud and security specialists, data engineering, integration, and experienced engineers who can lead modernisation safely. The exact hotspots depend on market conditions and regulation-driven deadlines.
What contract terms matter most in a more volatile market?
Scope clarity, change control, service levels, and responsibilities around security and data handling. It also helps to define how staffing changes are handled, how knowledge is documented, and what evidence you can expect for compliance.
Will stronger compliance requirements slow projects down?
They can, if they are treated as bolt-on paperwork. If governance and evidence are built into delivery routines, they usually add discipline rather than drag, and often reduce rework later.
How do we set “data boundaries” for cross-border delivery?
Define what data is allowed to leave your environment, what must stay within specific regions, and how access is controlled. Pair that with practical measures such as role-based access, logging, pseudoanonymisation, and clear rules for test data.
What does “evidence you can rely on” look like in practice?
Change logs, audit trails, security and access records, test evidence, documented reviews, and clear incident reporting. The goal is that you can answer internal or external questions without scrambling for proof.
How do you approach this at Gislen Software?
For European clients, our approach is steady and practical: disciplined engineering, clear governance, and documentation that supports audits and handovers. As trade and investment flows increase, we focus on delivering efficiently while maintaining serious controls around security, auditability, and responsible use of AI.
Contact us to discuss IT systems or if you are interested to learn how to engage with the Indian market in any other way. We know India, we know how to create quality software in India for European companies and we know how to use AI.