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India–EU FTA: What’s in store for both trading partners?

By Sangeeta Singh
Published Jan 30, 2026

Early this week the India–European Union Free Trade Agreement (India–EU FTA) concluded at the 16th India–EU Summit, marking a milestone in India–EU economic relations. It is the largest trade agreement that two trade partners have ever concluded. This comes at a time when the US has been unilaterally spoiling its relationship with several trading partners, including India, through imposition of irrationally high tariffs.

This FTA comes after the recently concluded India UK FTA. The India-UK CETA 2025 agreement included a wide-ranging package covering Information Technology /IT enabled services, business consulting, financial and professional services that will unlock high-value opportunities and job creation. Earlier in August 2025, India and Russia pushed to accelerate progress on the USD 100 billion bilateral trade target by 2030, including work on the India-EAEU FTA (Eurasian Economic Union Free Trade Agreement)

The India-EU FTA 2026 got executed after intense negotiations since the re-launch of negotiations in 2022. The announcement has demonstrated the political will o both sides and to deliver a balanced and rules-based economic and trade partnership¹.

India–EU Trade Relationship: Scale and Significance

In 2024–25, India’s bilateral trade in goods with the EU stood at USD 136.54 billion with exports worth USD 75.85 billion and imports amounting to USD 60.68 billion. India-EU trade in services was at USD 83.10 billion in 2024. Together, they account for one-third of global trade².

India has surpassed Japan to become the world’s fourth-largest economy with a GDP of USD 4.18 trillion and is the fastest-growing major economy and with geo-political scenario changing fast this trade deal could not have come at a better time. More recently, India’s trade policy is shifting to bilateral and regional cooperation. This is also a period of assertion, faith in its strategy and that of its trading partners³.

As a result of this deal the EU will eliminate tariffs on over 90% of tariff lines and India will eliminate tariffs on 86% of tariff lines. Additionally, both sides will partially liberalise a significant additional number of lines, thus bringing the overall coverage of trade liberalisation to 96.6% for India and 99.3% for the EU⁴.

Sectoral Gains for India and the European Union

Key benefits for the EU include agri-food, chemicals, pharmaceuticals, machinery, medical devices, avionics and automotive industries. For India it will be fisheries, chemicals, textiles, footwear gems and jewellery, handicrafts and pharmaceuticals.

India will remove high duties on industrial products (which, on average, are above 16%), such as chemicals, cosmetics, plastics, auto parts, ceramics, machinery and boats⁵. These duty reductions will provide better access to EU exports of these products which found it difficult to enter the Indian market given the high tariff barriers.

As regards India this will bolster the ‘Make in India’ initiative and benefit the small and medium enterprises. Besides, this deal will enable movement of skilled Indian professionals and unlock high-value commitments in services.

On automobiles, it will allow EU auto makers to introduce their models in India in higher price bands. The reciprocal market access in EU market will also open up opportunities for India made automobiles to access EU market⁶.

The FTA is also expected to facilitate cooperation in critical areas such as Artificial Intelligence, clean technologies, and semiconductors, supporting India’s technological advancement.

India’s Expanding FTA Strategy

EU becomes India’s 22nd FTA partner. The Government in the last decade has signed trade deals with Mauritius, UAE, UK, EFTA, Oman and Australia, and announced trade deal with New Zealand. In 2025, India signed trade deal with Oman and UK⁷. The competitiveness of India’s industry of late has given its export sector the necessary strength and confidence to increasingly go in for regional and bilateral trade⁸.

The agreement will benefit several key EU agri-food exports, such as:

Olive Oil (current tariff up to 45 %, to be eliminated at entry into force or after a 5-year staging)
Non-alcoholic beer and several fruit juices (current tariff up to 55 %, to be eliminated in 5 years)
Processed food such as confectionary, breads, pastry, pasta, chocolates, pet food (current tariff 33%, to be eliminated at entry into force or after staging)
Sheep meat (current tariff 33%, to be eliminated over staging)
Market access improvement for wine, spirits, beer, as well as fruits

Frequently Asked Questions (FAQs)

What is the India–EU Free Trade Agreement (FTA) and why is it significant?

The India–EU Free Trade Agreement is a comprehensive trade pact aimed at liberalising goods, services, and investment flows between India and the European Union. It is significant due to the scale of economic integration involved, covering two major economies that together account for nearly one-third of global trade.

How does the India–EU FTA align with India’s evolving trade policy strategy?

The agreement reflects India’s shift toward bilateral and regional trade arrangements, complementing its broader strategy of diversifying trade partnerships while reducing dependence on multilateral negotiations that have progressed slowly under the WTO framework.

What are the key tariff liberalisation commitments under the India–EU FTA?

Under the agreement, the EU will eliminate tariffs on over 90% of tariff lines, while India will eliminate tariffs on 86%. Partial liberalisation across additional lines increases overall trade coverage to 96.6% for India and 99.3% for the EU.

Which sectors are expected to benefit most from the India–EU FTA?

EU industries such as agri-food, pharmaceuticals, chemicals, machinery, automotive, and medical devices are expected to gain improved market access. Indian sectors likely to benefit include textiles, fisheries, footwear, gems and jewellery, handicrafts, and pharmaceuticals.

How does the India–EU FTA support India’s ‘Make in India’ initiative?

By reducing tariffs on industrial inputs and enabling greater access to EU markets, the agreement strengthens domestic manufacturing competitiveness and supports small and medium enterprises integrated into global value chains.

What implications does the agreement have for trade in services and labour mobility?

The FTA includes commitments facilitating the movement of skilled Indian professionals and expanding market access in services such as IT, consulting, finance, and professional services, enhancing India’s comparative advantage in human capital-intensive sectors.

How does the India–EU FTA affect India’s position in global value chains?

By improving access to advanced European markets and technologies, the agreement enhances India’s integration into global value chains, particularly in manufacturing, clean technologies, and high-value services.

What future cooperation areas are enabled by the India–EU FTA?

Beyond trade liberalisation, the agreement facilitates cooperation in strategic sectors such as artificial intelligence, clean energy, semiconductors, and digital technologies, supporting long-term economic resilience and technological advancement.

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