India-EU FTA Concluded: ‘Mother of All Deals’ Set to Reshape Global Trade

India and the European Union (EU) have concluded negotiations on a comprehensive Free Trade Agreement (FTA) at the 16th India-EU Summit, creating one of the world’s largest trade zones covering nearly 2 billion people. The deal delivers sweeping tariff liberalization, expanded market access, and enhanced investment protections, with major implications for manufacturing, services, agri-food, and supply chains across both regions.

India’s Prime Minister Narendra Modi announces conclusion of long-pending free trade deal

India and the European Union (EU) have formally concluded negotiations on a comprehensive Free Trade Agreement (FTA), marking a major breakthrough in one of the world’s longest-running bilateral trade talks.

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Prime Minister Narendra Modi announced the development on January 27, 2026, during the 16th India–EU Summit in New Delhi, describing the agreement as a strategic milestone encompassing nearly 25 percent of global GDP and close to one-third of worldwide trade.

Calling the pact transformational, Modi said the India-EU FTA is expected to unlock substantial economic opportunities for India’s 1.4 billion citizens and hundreds of millions across 27 EU member states, while strengthening policy coordination and commercial integration between two of the world’s largest economic blocs.

He added that the agreement complements India’s recently concluded trade arrangements with the United Kingdom (UK) and the European Free Trade Association (EFTA), underlining New Delhi’s accelerating push to deepen global trade partnerships. Meanwhile, the EU has also signed a pivotal trade pact with MERCOSUR in recent days, following agreements reached last year with Indonesia, Mexico, and Switzerland.

Although negotiations have now been finalized, officials confirmed that the India-EU trade agreement will proceed to legal vetting prior to formal signing – a technical process that may take several months. Once completed, the India-EU FTA will provide a significant boost to bilateral trade, investment flows, and supply chain cooperation, with key gains expected for textiles, leather, electronics, chemicals, and jewelry, etc.

‘Mother of all deals’: EU leaders welcome historic agreement

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European Commission President Ursula von der Leyen termed the agreement the “mother of all deals,” stating that it creates a free trade zone covering nearly two billion people. Speaking at India’s national capital, von der Leyen said the conclusion of the FTA after nearly two decades of negotiations demonstrated that India and Europe are “making history” by choosing cooperation, openness, and strategic partnership in a fragmented global environment.

European Council President Antonio Costa echoed this sentiment, highlighting India’s importance as a strategic partner for the EU.

The India-EU Free Trade Agreement marks a significant shift in India’s trade policy by progressively opening its large, highly regulated market to deeper economic integration with the 27-member European Union, India’s largest trading partner. A ‘mother of all deals’ indeed to cover a 2-billion-sized market. – Dezan Shira & Associates Europe Desk

India-EU FTA to see substantial tariff liberalization

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Under the agreement, India will reduce or eliminate import duties on nearly 97 percent of EU exports, a move expected to generate annual duty savings of up to €4 billion for European suppliers. This scale of tariff liberalization represents one of India’s most ambitious trade commitments to date.

Lower duties on automobiles: One of the most closely watched outcomes is the phased reduction in tariffs on passenger vehicles. Import duties on cars will be gradually brought down from a peak rate of 110 percent to as low as 10 percent, subject to volume limits. This is expected to improve consumer choice and introduce greater competition in the Indian automotive market.

Significant cuts on wines and spirits: India will also progressively reduce tariffs on wines, with duties falling from 150 percent to around 20 percent for premium categories. The move signals a measured opening of India’s agri-food import regime while maintaining safeguards for sensitive domestic sectors.

Zero tariffs on processed foods: High tariffs on processed food products, including pasta, chocolate, and other confectionery items, will be fully eliminated. Currently levied at rates of up to 50 percent, the removal of these duties is expected to lower input costs for food processors and expand consumer options.

This agreement marks a real turning point in how India connects with advanced economies. It’s not just about lower tariffs—it creates a more predictable environment for investment and strengthens India’s role as a manufacturing and services hub for European companies looking to diversify supply chains. For many European investors, this makes India an even more compelling base for production and exports, opening up opportunities for near-shoring, technology partnerships, and joint ventures. The companies that move early—by reviewing sourcing strategies, investment structures, and compliance readiness—will be the ones best positioned to benefit. – Melissa Cyrill, Asia Briefing

16^th India-EU summit delivers broader strategic push beyond trade

The FTA announcement has come alongside a wider push to deepen India-EU strategic ties. At the 16^th India-European Union summit, held in New Delhi, the two sides agreed to move forward with a Security and Defence Partnership (SDP), aimed at strengthening defense cooperation, improving interoperability, and enabling Indian companies to participate in the EU’s SAFE (Security Action for Europe) program, a €150 billion initiative to enhance Europe’s defense preparedness.

Source: Press Information Bureau

India and the EU also agreed to initiate talks on a Security of Information Agreement (SOIA), which is expected to facilitate deeper industrial and technological collaboration in the defense sector.

The summit agenda additionally covered cooperation in critical technologies, climate action, supply chain resilience, and global security, reflecting the expanding scope of the bilateral partnership.

Trade scale and economic impact

The EU is one of India’s largest trading partners in goods. In FY 2024-25, bilateral trade stood at approximately US$136.5 billion, with Indian exports valued at around US$75.8 billion and imports at about US$60.6 billion.

Source: Department of Commerce, Ministry of Commerce and Industry, GoI

As per latest media reports, officials on both sides described the India-EU FTA as among the largest bilateral trade agreements globally, given the economic scale involved and the breadth of market access commitments under negotiation.

India-EU relations timeline: From economic engagement to strategic partnership

The FTA milestone builds on a long history of steadily deepening ties between India and the European Union, evolving from early economic cooperation into a comprehensive strategic partnership.

1962 – Early economic engagement

India establishes formal relations with the European Economic Community (EEC), initiating structured economic interaction.

1993 – Political framework established

The adoption of a Joint Political Statement broadens the relationship beyond trade, strengthening political dialogue.

1994 – Institutionalized cooperation

The India–EU Cooperation Agreement formalizes collaboration across economic, technical, and development sectors.

2000 – Launch of summit-level dialogue

The first India–EU Summit in Lisbon ushers in regular high-level political engagement.

2004 – Strategic partnership elevation

At the fifth summit in The Hague, bilateral ties are upgraded to a strategic partnership, signaling deeper alignment.

2007 – Trade negotiations launched

Both sides begin negotiations on a Broad-based Trade and Investment Agreement (BTIA), setting the stage for future trade integration.

2020 – Long-term strategic vision

The India-EU Strategic Partnership Roadmap to 2025 is adopted, outlining cooperation in security, sustainability, digitalization, and innovation.

2022 – Technology and trade convergence

The establishment of the India-EU Trade and Technology Council (TTC) strengthens collaboration in emerging technologies and resilient supply chains.

2025 – Renewed strategic agenda

The EU rolls out a new strategic agenda focused on reinforcing economic prosperity, security cooperation, and long-term engagement with India.

Why now? Strategic timing amid global geopolitical shifts

The timing of the agreement is widely seen as significant. The summit took place against the backdrop of heightened transatlantic tensions and shifting global trade alignments. EU leaders have framed the India partnership as central to demonstrating an alternative model of engagement based on dialogue, shared prosperity, and multilateralism.

In recent days, EU leaders had also finalized a trade agreement with the South American MERCOSUR bloc, indicating a broader European push to diversify economic partnerships beyond traditional allies.

It took the current kind of global economic climate to realize these two economic blocs can shave off ancient tariffs and red tape. From the EU perspective, local SMEs, by some estimates, will save up to 4bn USD per year on tariffs; tariffs in the agrifood sector (including agro mechanics, storage tech and processing), chemicals, and industrial equipment will drop practically to zero from an average of 35%. Pharma will plummet to zero from around 11% and if you’re into cars, you’ll see a tumble from 110% to anywhere between 40% and 10% along with similar treatments for components. If you’re still scratching your head about today’s geopolitics, you may find solace in numbers, which generally don’t lie. So if your company is interested in this FTA, you can reach out to us — and we’ll help convert the facts into a plan for you. – Riccardo Benussi, Partner, Dezan Shira & Associates

What comes next – when will the India-EU FTA come into effect?

With negotiations concluded, the focus now shifts to legal scrubbing, ratification processes, and eventual signing. Once implemented, the India-EU FTA is expected to substantially reshape trade flows, investment patterns, and strategic cooperation between the two sides.

India and the EU, strategic partners since 2004, are also set to adopt a comprehensive strategic agenda covering defense, technology, connectivity, and global governance, reinforcing the long-term trajectory of the partnership beyond trade alone.

India-EU FTA FAQs

Why did the EU pursue an FTA with India?

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The agreement is intended to deepen economic and strategic ties between the world’s two largest democracies at a time of heightened geopolitical uncertainty and global economic volatility. India is now the world’s fourth-largest economy and its most populous nation, yet EU exports to India have historically lagged behind other major markets due to high tariffs and regulatory barriers. The FTA addresses these constraints by lowering trade costs and improving market access, thereby strengthening both economic and political cooperation.

How will the agreement affect EU exports?

The FTA is expected to significantly boost EU exports to India, with projections indicating a potential doubling of goods exports over the medium term. Improved access to India’s services market, particularly in financial, maritime, and other professional services, will further expand commercial opportunities and support job creation across Europe. EU exports to India already underpin around 800,000 jobs, with scope for further employment growth as trade expands.

What are the main advantages for EU exporters?

According to the European Commission press release, the agreement offers multiple benefits for European exporters, including:

• Elimination or reduction of tariffs on more than 90 percent of EU goods exports
• Annual duty savings of up to €4 billion
• The most extensive trade opening India has offered to any partner, enhancing EU competitiveness
• Preferential access for EU service providers in key sectors such as financial and maritime services
• Streamlined customs and trade procedures to reduce delays and costs
• Stronger protection for intellectual property, including trademarks
• A dedicated chapter addressing the needs of small and medium-sized enterprises (SMEs)

How does the agreement benefit EU industry?

India has committed to tariff reductions for the EU that exceed those offered to other trading partners, substantially improving market access for European manufacturers. High import duties across several sectors will be largely phased out.

Notable sectoral outcomes include:

1. Automobiles: Tariffs reduced from 110 percent to 10 percent under a quota of 250,000 vehicles annually; to benefit Volkswagen AG, Mercedes-Benz Group AG, Stellantis NV, and Renault SA.
2. Machinery and electrical equipment: Tariffs of up to 44 percent eliminated for most products.
3. Chemicals, pharmaceuticals, aircraft, medical devices, steel, and plastics: Near-complete tariff elimination across most categories.

These changes are expected to enhance the competitiveness of EU industrial exports in the Indian market.

How will EU farmers and agri-food producers benefit?

The agreement removes or lowers tariffs, often exceeding 36 percent, on a wide range of EU agri-food exports, opening significant new opportunities for European farmers. At the same time, sensitive EU sectors such as beef, sugar, and rice remain fully protected.

Key gains include:

• • Sharp tariff reductions on wine, spirits, beer, olive oil, fruits, processed foods, and meat products
  • Full tariff elimination on several processed food categories
  • Safeguards for sensitive European agricultural sectors

In parallel, a separate Geographical Indications (GI) Agreement is under negotiation to protect traditional EU products from imitation and enhance their recognition in the Indian market.

What does the agreement mean for EU service providers?

The FTA grants EU firms enhanced and preferential access to India’s services market, including financial and maritime services. India’s commitments in financial services are the most ambitious it has undertaken in any trade agreement to date, going beyond concessions offered to other partners.

How does the agreement support small businesses?

A dedicated SME chapter ensures that smaller companies can benefit from the agreement through:

• Easy access to information on doing business in both markets
• Designated SME contact points to resolve practical trade issues
• Reduced tariffs, fewer regulatory barriers, and greater transparency
• More predictable rules, enabling cost-effective and efficient cross-border trade

How does the FTA prevent misuse of tariff benefits by third countries?

The agreement includes robust rules of origin, ensuring that only goods substantially produced or processed in India or the EU qualify for preferential tariffs. This prevents third-country products from entering the EU via India solely to exploit tariff reductions.

How does the agreement reduce red tape?

India and the EU have agreed to simplified and transparent customs procedures, faster clearance of goods, and predictable regulatory practices. The agreement also enhances cooperation on supply chain security and strengthens risk management at EU borders.

What steps are required before the agreement enters into force?

Before implementation, the EU must complete several procedural steps, including:

1. Publication of the negotiated legal texts
2. Legal review and translation into all EU official languages
3. Approval by the Council and the European Parliament
4. Formal signing by the EU and India
5. Ratification by both sides

Executive Q&A for Indian businesses and investors

Why does the India-EU FTA matter for Indian companies and investors?

The agreement anchors India more deeply into global value chains at a time of geopolitical fragmentation and supply-chain realignment. It improves access to one of the world’s largest and most affluent markets while strengthening India’s position as a preferred investment destination for European capital, technology, and manufacturing. For investors, the FTA enhances predictability, scale, and long-term policy alignment between two major economic blocs.

How will the FTA affect Indian exports to the EU?

Indian exporters will benefit from improved market access, lower tariff barriers, and more transparent regulatory procedures in the EU. Sectors such as pharmaceuticals, engineering goods, chemicals, textiles, automotive components, and processed foods are expected to see stronger export competitiveness. Simplified customs procedures and clearer rules will also reduce time-to-market and compliance costs.

What opportunities does the agreement create for foreign investors in India?

The FTA strengthens India’s appeal as a manufacturing and services hub for European companies seeking diversification and near-shoring alternatives. Reduced tariffs, stable trade rules, and a parallel Investment Protection Agreement are expected to encourage:

1. Greenfield manufacturing investments
2. Expansion of existing European operations in India
3. Greater technology transfer and joint ventures
4. Integration of India into EU-centric supply chains

How does the India-EU FTA improve investment certainty?

The proposed investment protection framework introduces safeguards against discrimination, unfair treatment, and uncompensated expropriation, while preserving India’s right to regulate in the public interest. It also provides for a modern dispute resolution mechanism, offering foreign investors clearer legal recourse and greater confidence in long-term capital deployment.

Which Indian sectors are likely to gain the most?

Key beneficiary sectors include:

1. Manufacturing: automotive components, machinery, chemicals, pharmaceuticals, and electronics
2. Agri-processing and food exports: improved access for value-added products
3. Services: IT-enabled services, professional services, logistics, and maritime services
4. Green and advanced technologies: renewable energy, clean manufacturing, and industrial innovation

How does the FTA affect Indian MSMEs and startups?

The agreement includes provisions designed to help smaller firms participate in cross-border trade. Indian MSMEs will benefit from:

• Easier access to trade-related information
• Reduced tariffs and regulatory friction
• Greater transparency and predictability in EU market entry
• Stronger intellectual property protection, particularly valuable for startups and innovation-driven firms

What does the FTA mean for services and digital businesses in India?

Indian service providers gain improved access to EU markets through clearer rules and enhanced cooperation frameworks. The digital trade provisions support secure and predictable cross-border digital commerce, while preserving regulatory autonomy. This is particularly relevant for IT services, fintech, logistics platforms, and digital exporters.

How does the agreement support India’s manufacturing and “Make in India” objectives?

By lowering trade barriers and encouraging EU investment, the FTA aligns closely with India’s manufacturing and industrial policy goals. It positions India as a competitive production base for exports to Europe, particularly in sectors where EU companies are seeking resilient and diversified supply chains.

How are Indian regulatory interests and public policy safeguarded?

The agreement preserves India’s right to regulate in areas such as public health, safety, environment, labor standards, and digital governance. EU imports into India and Indian exports to the EU will continue to comply with respective domestic standards, ensuring regulatory autonomy is maintained.

How are trade disputes likely to be resolved?

A structured dispute settlement mechanism allows trade disagreements to be resolved through independent expert panels, with binding outcomes and transparent procedures. Mediation options offer a faster route to resolution, reducing prolonged uncertainty for businesses and investors.

When will Indian businesses see the benefits?

While negotiations are complete, the agreement must undergo legal review, ratification, and formal signing, which can take up to six months from the date of finalization. Once in force, tariff reductions and market access benefits will be phased in, with early gains expected in high-volume trade sectors and export-oriented manufacturing.

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