Current Affairs
India-EU FTA: Strategic Trade Deal for India’s Future
India and the European Union (EU) announced the Free Trade Agreement (FTA), an important milestone in one of India’s most strategic economic partnerships.
The India–EU FTA (India–European Union Free Trade Agreement), concluded on January 27, 2026, marks a watershed moment in India’s global trade strategy and has been widely described by leaders on both sides as the “mother of all deals.” Announced by the Prime Minister of India alongside European Commission President Ursula von der Leyen and European Council President Antonio Costa at the 16th India–EU Summit, the agreement makes the European Union India’s 22nd Free Trade Agreement partner.
By integrating India, the world’s fourth-largest economy, and the European Union, the second-largest economy, the India-EU FTA creates a combined market of nearly 2 billion people, accounting for about 25% of global GDP.
What Makes the India-EU FTA Historic?
The India-EU FTA is the outcome of a prolonged negotiation process that began in 2007, was suspended in 2013, and later revived in 2022. Its conclusion after nearly two decades highlights strategic trust between India and the European Union.
This FTA covers a wide spectrum including trade in goods and services, digital commerce, investment protection, and sustainable development.
With a combined market size of nearly USD 24 trillion, the agreement is expected to substantially deepen economic ties. Projections suggest that EU exports to India could double by 2032, while Indian manufacturers may unlock over USD 75 billion in export opportunities.
Market Access for Indian Exports
A major achievement of the India-EU Free Trade Agreement is the enhanced market access it provides to Indian exporters. More than 99% of Indian exports by trade value will now receive preferential access to the EU market.
This reduction in tariff and non-tariff barriers is expected to improve the competitiveness of Indian products and integrate Indian firms more deeply into European supply chains, especially in sectors where tariff protection previously constrained export growth.
Boost to Labour-Intensive Sectors
The FTA delivers major gains to labour-intensive industries, where EU tariffs previously ranged from 4% to 26%. Nearly USD 33 billion worth of exports will benefit from zero-duty access. Key Beneficiary Sectors are:
- Textiles & Apparel: Zero-duty access across all textile and clothing tariff lines to the EU’s USD 263.5 billion import market, with reducing tariffs by up to 12%.
- Leather & Footwear: Removal of tariffs up to 17%, opening the USD 100 billion EU market.
- Marine Products: Elimination of tariffs up to 26% on shrimp and processed seafood.
- Gems & Jewellery: Zero-duty access across 100% of trade value
- Engineering Goods: Preferential access benefiting MSME-led industrial clusters.
These sectors are critical for employment generation, particularly for women, artisans, and youth. The textile sector alone employs around 45 million people, and improved access to EU markets is expected to boost production capacity and job creation.
Agricultural and Processed Food Exports
Indian farmers and agro-processors are set to benefit from preferential access for products such as tea, coffee, spices, table grapes, gherkins, cucumbers, dried onion, and processed foods. This improved access is expected to enhance rural incomes and strengthen India’s presence in European agri-food value chains.
At the same time, India has safeguarded sensitive sectors including dairy, cereals, poultry, and soymeal, ensuring that domestic agricultural priorities and food security concerns are protected while pursuing export-led growth.
Services and Digital Trade
A key feature of the India-EU FTA is its strong emphasis on services and digital trade, which represent the fastest-growing components of both economies.
Under the agreement, the European Union has offered market access commitments across 144 services subsectors, including IT and IT-enabled services, professional services, education, financial services, tourism, and construction. In return, India has opened 102 services subsectors to European firms. This arrangement provides greater certainty, predictability, and non-discriminatory treatment for Indian service providers operating in the EU.
Professional Mobility Provisions
The agreement introduces a structured professional mobility framework that facilitates the movement of Indian professionals to EU member states. It provides entry and stay provisions for business visitors, intra-corporate transferees, contractual service suppliers, and independent professionals across a wide range of subsectors including IT, research and development, and higher education.
Importantly, both India and the EU have agreed to conclude Social Security Agreements with all EU member states within five years, which will prevent double social security contributions and enhance the attractiveness of Europe as a destination for Indian professionals.
Strategic Sectors and ‘Make in India’
Automobile Sector: Calibrated Liberalisation
The automobile sector represents one of India’s key concessions under the agreement. Under the agreement, tariffs on cars exported from the EU to India will be gradually lowered from the current 110% to 10%. In addition, tariffs on car parts will be fully abolished over a period of 5-10 years.
This calibrated approach allows European luxury car manufacturers such as BMW and Mercedes-Benz to expand their presence in India, while protecting the domestic mass-market segment, particularly vehicles priced below ₹25 lakh. At the same time, Indian automobile exports are expected to gain improved access to EU markets, supporting the ‘Make in India’ initiative.
Pharmaceuticals and Medical Devices
The India-EU FTA also unlocks access to the USD 572.3 billion EU pharmaceuticals and medical devices market. Liberalisation of tariffs on medical instruments, lenses, spectacles, and measuring devices, which previously attracted duties of up to 6.7%, will enhance India’s competitiveness as the “pharmacy of the world.”
Beyond tariff liberalisation, the agreement addresses long-standing non-tariff barriers through strengthened regulatory cooperation, improved transparency, and streamlined customs procedures, alongside harmonisation of Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) disciplines, critical for faster approvals and smoother market entry for Indian pharma and med-tech firms.
At the same time, the FTA retains a TRIPS-compliant framework, carefully balancing the protection of pharmaceutical innovation with India’s capacity to manufacture affordable generic medicines, thereby safeguarding public health priorities while expanding export opportunities.
Sustainability and Climate Commitments
Sustainability forms a core pillar of the India-EU FTA. The Trade and Sustainable Development (TSD) chapter includes binding commitments related to environmental protection, labour rights, and gender empowerment, integrating economic growth with social and ecological responsibility.
Carbon Border Adjustment Mechanism (CBAM)
India has secured a Most-Favoured-Nation assurance under the agreement, ensuring that any flexibilities extended to other countries under the EU’s Carbon Border Adjustment Mechanism will also apply to India. The agreement further establishes technical cooperation on carbon pricing recognition, verification standards, and financial assistance to help Indian exporters, particularly in the steel and aluminium sectors, meet compliance requirements.
Conclusion
The India-EU FTA goes beyond a conventional commercial agreement and represents a geostrategic partnership that positions India as a credible and trusted global economic player. By bringing together two democratic economic blocs, the agreement helps counter global trade fragmentation while promoting rules-based cooperation.
For India, the FTA provides a platform for manufacturing expansion, services-led growth, rural prosperity, and global talent mobility, aligning closely with the vision of ‘Viksit Bharat 2047’. Alongside India’s FTAs with the UK and EFTA, this agreement significantly deepens India’s engagement with European markets and is likely to shape the country’s economic trajectory for decades.
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India-EU FTA FAQs
1. When was the India-EU FTA signed?
Ans. January 27, 2026.
2. What is the combined GDP share of India and EU in global trade?
Ans. Approximately 25% of global GDP.
3. What professional mobility benefits does India-EU FTA provide?
Ans. Structured framework for business visitors and independent professionals etc.
4. Why is the India-EU FTA called the “mother of all deals”?
Ans. It creates a combined market of nearly 2 billion people accounting for 25% of global GDP.
5. How many services subsectors does the EU open under India-EU FTA?
Ans. 144 services subsectors.
