THEBUSINESSBYTES
BUREAU
NEW DELHI, JANUARY 27, 2026
India and
the European Union on Tuesday announced the conclusion of the long-awaited
India–EU Free Trade Agreement (FTA), marking a historic leap in bilateral
economic engagement and reshaping one of the world’s most consequential trade
partnerships. The announcement was jointly made by Prime Minister Narendra Modi
and European Commission President Ursula von der Leyen at the 16th India–EU
Summit during the visit of European leaders to India.
The pact
crowns years of sustained negotiations following the re-launch of talks in 2022
and signals a shared commitment to open markets, predictability and inclusive
growth at a time of rising global trade uncertainties. With this agreement,
India and the EU position themselves as trusted partners aligned on a modern,
rules-based economic framework with strategic depth beyond conventional trade.
The scale of
the partnership is formidable. India and the EU are the world’s fourth- and
second-largest economies respectively, together accounting for nearly 25 per
cent of global GDP and about one-third of world trade. In 2024–25, bilateral
trade in goods stood at ₹11.5 lakh
crore (USD 136.54 billion), with India exporting goods worth ₹6.4 lakh crore
and importing ₹5.1 lakh crore. Trade in services touched ₹7.2 lakh crore (USD
83.10 billion), underlining the growing importance of services in the relationship.
Union
Commerce and Industry Minister Piyush Goyal described the FTA as a defining
achievement in India’s global economic engagement, crediting Prime Minister
Modi’s strategic vision and leadership. He said the agreement goes far beyond a
conventional trade deal, emerging as one of the most comprehensive and
consequential FTAs India has ever concluded. According to Goyal, India has
secured unprecedented market access for over 99 per cent of its exports by
trade value to the EU, significantly strengthening the ‘Make in India’
initiative.
A major
highlight of the agreement is the immediate elimination of tariffs — up to 10
per cent — on nearly USD 33 billion worth of Indian exports, delivering a
decisive boost to labour-intensive sectors such as textiles, apparel, leather,
footwear, marine products, gems and jewellery, handicrafts, engineering goods
and automobiles. The gains are expected to ripple across the economy,
empowering workers, artisans, women, youth and MSMEs while integrating Indian
firms deeper into global value chains.
The
automotive sector features a calibrated, quota-based liberalisation framework
that allows EU manufacturers to introduce high-end models in India, while
opening future possibilities for manufacturing and exports from India. Indian
consumers stand to benefit from greater competition and access to
high-technology vehicles, while reciprocal access creates new opportunities for
India-made automobiles in the European market.
Agriculture
and processed food sectors are also set for a transformative lift. Products
such as tea, coffee, spices, fresh fruits and vegetables, and processed foods
will gain enhanced competitiveness in the EU, strengthening rural livelihoods
and reinforcing India’s credentials as a reliable global supplier. At the same
time, India has safeguarded sensitive areas including dairy, cereals, poultry
and select fruits and vegetables, ensuring domestic priorities remain
protected.
Beyond
tariff reductions, the FTA addresses long-standing non-tariff barriers through
deeper regulatory cooperation, improved transparency and streamlined customs,
sanitary and phytosanitary procedures, and technical standards. Importantly,
the agreement incorporates forward-looking provisions related to the EU’s
Carbon Border Adjustment Mechanism (CBAM), securing assurances on
non-discriminatory treatment, technical cooperation, recognition of carbon
pricing mechanisms and verifiers, and access to financial and technical support
to help Indian exporters meet emerging climate-related requirements.
Services,
the fastest-growing component of both economies, form a central pillar of the
pact. The agreement guarantees predictable market access and non-discriminatory
treatment across a wide spectrum of services, including IT and IT-enabled
services, professional services, education, financial services, tourism,
construction and other business services. India gains assured access to 144 EU
services subsectors, while the EU secures entry into 102 Indian subsectors,
creating a mutually beneficial flow of talent, technology and investment.
Mobility
provisions add another strategic dimension. The FTA establishes a facilitative
and predictable framework for short-term business travel, intra-corporate
transferees and business visitors, with commitments covering dependents and
family members. The EU has opened 37 sectors for contractual service suppliers
and 17 for independent professionals, many aligned with India’s strengths.
Frameworks for student mobility, post-study work opportunities and future social
security agreements further enhance people-to-people and professional
exchanges. Notably, India has also secured pathways for practitioners of
traditional Indian medicine to work in EU member states where such practices
are unregulated.
In financial
services, the pact promotes innovation, cooperation on cross-border digital
payments and deeper financial integration, while improving market access for
Indian players across major EU economies. Strong intellectual property
protections aligned with TRIPS, recognition of the Doha Declaration, and
safeguards for India’s Traditional Knowledge Digital Library underscore a
balanced approach to innovation and heritage.
The
agreement is also expected to catalyse cooperation in frontier areas such as
artificial intelligence, clean technologies and semiconductors, supporting
India’s long-term technological and industrial ambitions. With built-in review
and consultation mechanisms, the pact is designed to remain resilient and
responsive amid evolving technologies and regulatory landscapes.
The EU
becomes India’s 22nd FTA partner, adding to a growing network of trade
agreements signed since 2014 with economies including the UAE, Australia, the
UK, EFTA, Oman and Mauritius. Together with India’s FTAs with the UK and EFTA, the
India–EU deal effectively opens the entire European market to Indian
businesses.
Aligned with
the vision of “Viksit Bharat 2047,” the India–EU FTA marks a new chapter in
bilateral economic and strategic cooperation, promising to scale up trade, spur
innovation and deliver inclusive, future-ready growth for both India and the
27-nation EU bloc.