In an era marked by trade wars, supply-chain shocks, and rising economic nationalism, large economies are turning inward whereas India and
the European Union have chosen the opposite path.
By concluding one of the most ambitious Free Trade Agreements of the decade, the two partners have signaled that cooperation, not protectionism will define their economic future. Encompassing markets worth trillions of dollars and hundreds of millions of consumers, the pact goes far beyond tariff cuts. It is a strategic bet on shared growth, technological collaboration, and geopolitical alignment and one that could transform India’s export landscape and strengthen Europe’s engagement with the world’s fastest-growing major economy.
In a historic milestone for international economic diplomacy, India and the European Union (EU) have successfully concluded a Free Trade Agreement (FTA) after nearly two decades of negotiations on 27 January 2026. Prime Minister Narendra Modi announced the breakthrough during the 16th India– European Union Summit held in New Delhi, coinciding with India’s 77th Republic Day celebrations. European Commission President Ursula von der Leyen and European Council President António Costa attended the summit, highlighting the strategic and economic significance of the agreement.
Described by Prime Minister Modi as the “mother of all deals,” the Free Trade Agreement is poised to reshape trade dynamics between India and the European Union, which together account for approximately 25 percent of global Gross Domestic Product (GDP) and one-third of world trade. Amid global trade uncertainties and rising protectionism, the agreement provides a framework for resilient, sustainable and mutually beneficial economic growth.
Historical Context and Negotiations
What appeared in 2007 as a straightforward trade negotiation soon evolved into one of the most protracted economic dialogues in India–EU relations. The talks advanced, stalled, and restarted multiple times, tangled in disputes over tariffs, services access, and the protection of politically sensitive sectors like agriculture and automobiles. Each breakthrough was followed by fresh disagreements. For nearly two decades, the agreement remained elusive, demanding persistent diplomacy, strategic compromises, and the political courage to reconcile domestic concerns with global ambitions.
In 2022, talks were relaunched with renewed commitment to reach a balanced, forward-looking agreement. Commerce Secretary Rajesh Agrawal described the concluded Free Trade Agreement as “balanced, mutually beneficial, and strategically important”, reflecting a consensus that safeguards domestic interests while promoting growth and integration.
Understanding the India– European Union Free Trade Agreement
The India– European Union Free Trade Agreement aims to make trade and investment easier, faster, and cost-effective by reducing tariffs, simplifying customs procedures, and improving access to key services sectors. For Indian exporters, the agreement provides opportunities to expand in sectors like textiles, gems and jewellery, leather goods, pharmaceuticals, chemicals, and machinery, while offering European companies better access to India’s large and growing consumer market.
The agreement also covers services, including telecommunications, professional services, and transport, allowing professionals and companies to operate across borders with fewer restrictions. Sensitive sectors such as agriculture have been protected to ensure a balanced approach, promoting trade growth without compromising domestic priorities. Legal vetting of the treaty text is underway, with formal signing expected in 2026 and implementation in early 2027.
Economic Implications for India
The Free Trade Agreement is expected to strengthen India’s manufacturing and services sectors, enhance competitiveness, and attract foreign investment. Indian industries likely to benefit include textiles, leather goods, gems and jewellery, chemicals, pharmaceuticals, and machinery, gaining improved access to European markets.
In the services sector, professionals in IT, consulting, telecom, and logistics will experience smoother operations and better market access. This is expected to create employment opportunities, foster skill development, and encourage technology transfer, further enhancing India’s global economic presence.
Economic Implications for the European Union
European businesses will gain from improved access to India’s fast-growing consumer base, enabling investment in manufacturing, technology, and services. The Free Trade Agreement also aligns with the European Union’s objective of diversifying trade partnerships and reducing dependence on traditional markets amid global trade uncertainties. Key sectors that will benefit include automobiles, machinery, chemicals, and professional services, fostering greater bilateral economic integration.
Bilateral Trade and Sectoral Impact
Bilateral trade between India and the European Union was approximately USD 136.5 billion in 2024–25, with Indian exports valued at USD 75.8 billion and imports at USD 60.6 billion. Services trade further strengthens economic engagement between the two partners. The Free Trade Agreement is expected to have significant sector-specific impacts. In manufacturing and machinery, reduced tariffs are likely to improve competitiveness in European markets. Indian brands in textiles, gems, and jewellery stand to benefit from easier market access and lower costs, while regulatory alignment and tariff reductions in pharmaceuticals and chemicals enhance India’s role as a global supplier. Professional services, including IT, consulting, and logistics, are expected to gain operational clarity and new market opportunities. Overall, the Free Trade Agreement is anticipated to create business opportunities, increase investment flows, and drive economic growth for both India and the European Union.
Strategic and Geopolitical Implications
Beyond trade, the agreement has significant strategic implications. By diversifying trade partners, both India and the European Union enhance economic resilience amid global uncertainty. The Free Trade Agreement also strengthens cooperation in defence, security, technology, and mobility, reflecting a broad-based strategic partnership.
For India, the Free Trade Agreement reinforces its role as a key global economic and strategic partner, while for the European Union, it supports strategic autonomy and engagement with dynamic Asian markets. This agreement exemplifies how large, diverse economies can negotiate mutually beneficial outcomes that balance domestic priorities with long-term growth.
Future Outlook and Implementation
With the treaty text undergoing legal vetting, the formal signing of the Free Trade Agreement is expected in 2026, followed by its implementation in early 2027. Once operational, the agreement is expected to boost trade volumes and reduce costs for businesses, encourage investment and innovation, promote technology transfer and professional mobility, and serve as a benchmark for future bilateral and multilateral trade agreements. The Free Trade Agreement also demonstrates a shared commitment to resilient, inclusive, and sustainable economic growth, while setting a precedent for strategic partnerships in the 21st century.
The India–European Union Free Trade Agreement is more than a commercial arrangement; it is a strategic commitment to deeper cooperation between two of the world’s largest democratic economies. Beyond tariff cuts and market access, it promises expanded opportunities for businesses, professionals, and investors while strengthening economic resilience in an uncertain global order. At a time when protectionism is on the rise, India and the EU have chosen integration over isolation.
As President John F. Kennedy once observed, “Trade is the ally of peace.” In that spirit, the India–EU FTA stands not only as an economic pact, but as a bridge of trust, partnership, and shared prosperity for the decades ahead.
Khushi Nayyar
Legal Trainee, SMA Legal
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