Milestone Achieved in Trade Relations
India and the European Union have successfully concluded negotiations for a comprehensive free trade agreement (FTA) after nearly two decades of discussions. The announcement was made by Commerce Secretary Rajesh Agrawal on January 26, 2026, marking a significant milestone in expanding trade and investment between the two regions.
“Negotiations have been successfully concluded. The deal has been finalized,” Agrawal stated, adding that the agreement is designed to be balanced and forward-looking from India’s perspective, enhancing integration with the EU economy.
Background of the Agreement
Negotiations for the FTA began in 2007, making it one of the longest ongoing trade discussions in India’s history. The pact covers various areas, including trade in goods, services, and investment, alongside separate talks on investment protection and Geographical Indications (GI). The agreement’s significance is underscored by its potential to stimulate economic growth and diversify India’s trade partnerships.
European Commission President Ursula von der Leyen, attending India’s Republic Day celebrations, emphasized the importance of India’s role in fostering global stability and prosperity. She described the conclusion of the FTA talks as a beneficial development for both parties.
Key Features of the Free Trade Agreement
Tariff Reductions and Economic Benefits
The agreement is set to provide Indian exporters, particularly from labor-intensive sectors such as textiles and chemicals, with preferential access to EU markets. Currently, India’s exports to the EU face an average tariff of about 3.8%, while labor-intensive products typically incur duties of around 10%.
On the other hand, Indian duties on EU goods average at 9.3%, with notably high tariffs on automobiles and pharmaceuticals. The new FTA encourages both nations to eliminate or reduce tariffs on over 90% of traded goods, which could significantly benefit various sectors.
Impact on Trade Dynamics
The pact holds particular significance amid an environment of disrupted global trade flows and increased tariffs from the United States. With existing challenges, India sees the need to diversify its export markets, reducing reliance on traditional partners and lowering dependence on China.
The trade volume between India and the EU reached $136.53 billion in the 2024-25 period, with India’s exports valued at $75.85 billion and imports at $60.68 billion, establishing the EU as India’s largest trading partner in goods. This new agreement is expected to enhance this figure and provide more robust trading opportunities.
Completion of Legal Formalities
The FTA text is currently undergoing legal scrubbing, with officials working to complete procedural formalities ahead of a signing expected later this year. While the agreement will require approval from the Union Cabinet in India, it must also be ratified by the European Parliament, which could extend the timeline for implementation.
Commerce and Industry Minister Piyush Goyal termed this FTA as “the mother of all deals,” emphasizing its scale and importance. It will be formally announced at the upcoming India-EU Summit in New Delhi, attended by key European leaders.
Future Prospects and Strategic Importance
This FTA is part of a broader strategy by India’s government to enhance its network of international trade agreements. Since 2014, India has finalized several major trade pacts, increasingly positioning economic diplomacy as a key aspect of its global strategy.
India’s major exports to the EU include petroleum products, electronics, and textiles, as well as machinery and organic chemicals. Meanwhile, imports from the EU are led by machinery and electronics, underscoring the interdependence that this trade partnership creates.
Final Thoughts and Next Steps
The completion of this FTA represents more than just an economic agreement; it signals a strategic partnership aimed at fostering collaborative growth amid a changing global landscape. In the weeks ahead, more details regarding the operational aspects of the agreement and its rollout will be released.
Experts anticipate that the impact of this agreement could echo across various sectors, strengthening ties between India and Europe while contributing to broader economic stability for both regions. The success of the ensuing legal and administrative processes will be crucial for this agreement to reach its full potential.