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.