India-EU Free Trade Agreement 2026
"Mother of All Deals"
Unlocking unprecedented opportunities, empowering 2 billion people, and reshaping global trade dynamics through the world's largest comprehensive economic partnership.
Agreement Overview
Historic Milestone
The India-European Union Free Trade Agreement, concluded on January 27, 2026, at the 16th India-EU Summit in New Delhi, marks the culmination of nearly two decades of negotiations. Originally launched in 2007, negotiations stalled in 2013 but were relaunched on June 17, 2022, driven by changing geopolitical realities and mutual strategic interests.
This comprehensive partnership between the world's fourth and second-largest economies creates a free trade zone of approximately 2 billion people, representing roughly 25% of global GDP valued at approximately USD 25 trillion, and accounting for one-third of world trade.
Strategic Context
The agreement was announced by Prime Minister Narendra Modi, European Commission President Ursula von der Leyen, and European Council President António Costa. Von der Leyen and Costa attended India's Republic Day celebrations on January 26, 2026, as chief guests, highlighting the strategic importance of this partnership. The FTA is accompanied by a Security and Defence Partnership and a Mobility and Migration Agreement, making it a comprehensive strategic engagement beyond just trade.
Market Access: India Secures Unprecedented Entry to EU Markets
India's Export Gains
India has secured preferential access to European markets across 97% of tariff lines, covering an unprecedented 99.5% of India's exports by trade value—the most comprehensive market opening India has achieved in any trade agreement.
Immediate Duty Elimination (70.4% tariff lines)
Covering 90.7% of India's exports worth approximately USD 33 billion in key labour-intensive sectors including textiles, apparel, leather, footwear, gems and jewellery, marine products, sports goods, toys, tea, coffee, and spices. Tariffs ranging from 4% to 26% eliminated immediately upon entry into force.
Phased Duty Elimination (20.3% tariff lines)
Covering 2.9% of exports, with zero duty access achieved over 3-5 year periods for certain marine products, processed food items, and arms and ammunition.
Preferential Access (6.1% tariff lines)
Covering 6% of exports through tariff reduction for poultry products, preserved vegetables, and bakery products, or through Tariff-Rate Quotas (TRQs) for cars, steel, and certain shrimp/prawn products.
EU Export Expectations
The European Commission projects that EU exports to India will potentially double by 2032 as a result of the FTA. The agreement is expected to save EU companies up to €4 billion annually in customs duties, providing a significant competitive advantage to European exporters entering the world's most populous and fastest-growing major economy.
India's Offer to the European Union
Balanced Liberalization Strategy
India has adopted a calibrated approach, offering 92.1% of its tariff lines covering 97.5% of EU exports by value, while strategically protecting sensitive domestic sectors. This represents the most ambitious tariff liberalization India has offered to any trading partner.
Key EU Export Opportunities
| Sector | Current Tariff | FTA Concession | Timeline |
|---|---|---|---|
| Automobiles | Up to 110% | Gradual reduction to as low as 10% | Phased over time with TRQ of 250,000 vehicles |
| Car Parts | Various tariffs | Full elimination | 5-10 years |
| Machinery & Electrical Equipment | Up to 44% | Mostly eliminated | Immediate to 5 years |
| Chemicals | Up to 22% | Largely eliminated | Entry into force |
| Pharmaceuticals | 11% | Mostly eliminated | Entry into force to 3 years |
| Iron and Steel | Up to 22% | Eliminated with some TRQs | Phased |
| Aircraft & Spacecraft | Up to 11% | Eliminated | Phased |
| Cosmetics | Up to 22% | Phased elimination | 5-7 years |
| Plastics | Various tariffs | Partial liberalization at entry, broader cuts later | Entry into force, full after 7 years |
| Textiles & Apparel | Various tariffs | Most tariffs removed | Immediate |
EU Agri-Food Sector Gains
EU agri-food exports to India have nearly tripled from 2020 to 2024. The FTA delivers unprecedented agricultural market access, reducing Indian tariffs that currently average 36% and can reach as high as 150%.
| Product | Current Tariff | FTA Concession | Timeline |
|---|---|---|---|
| Wine | 150% | 75% at entry, eventually to as low as 20% | Phased reduction |
| Olive Oil | 45% | 0% | 5 years |
| Spirits & Beer | High tariffs | Preferential access | Phased |
| Bread & Confectionary | Up to 50% | Eliminated | Phased |
| Apples, Pears, Peaches, Kiwi Fruit | Various tariffs | TRQs established | Entry into force |
EU Sensitive Sectors Protection
The EU maintains full protection for sensitive agricultural products including beef, chicken meat, rice, sugar, milk powder, honey, bananas, soft wheat, garlic, and ethanol. All Indian imports must respect EU's strict health and food safety standards with no exceptions. The agreement includes bilateral safeguard mechanisms and calibrated quotas for sheep & goat meat, sweetcorn, grapes, cucumbers, dried onions, rum, and starches.
Sectoral Impact & Opportunities
Labour-Intensive Sectors: Employment Generation Engine
The FTA provides transformative opportunities for India's labour-intensive sectors, which collectively account for over USD 33 billion in exports currently facing EU tariffs between 4% to 26%.
Engineering & Industrial Goods
Engineering Goods
Medical Instruments
Chemicals
Plastics & Rubber
Mines & Minerals
Furniture & Home Décor
Agriculture & Processed Foods
Export Opportunities
✓ Reinforces rural livelihoods
✓ Enhances women's participation
Strategic Protections
✓ Protects farmer livelihoods
✓ Ensures food security
Services: The High-Value Growth Driver
India's Services Export Opportunities
Services, being the dominant and faster-growing part of both economies, will drive future trade growth. India has secured expanded commitments from the EU across 144 services subsectors, providing certainty of market access, non-discriminatory treatment, focus on digitally delivered services, and ease of mobility.
Key Services Sectors
IT & IT-enabled Services (ITeS)
India's competitive, high-tech services are expected to drive exports while benefiting EU businesses and consumers. Predictable access across EU markets with binding commitments exceeding India's agreements with UK and Australia.
Professional Services
Comprehensive commitments covering consulting, legal, accounting, architecture, engineering, and other professional services. Enhanced transparency through obligations on senior management, boards of directors, and local presence requirements.
Education Services
Expanded access for Indian educational service providers. Constructive framework to enable Social Security Agreements within 5 years with all EU Member States, plus continuing conducive framework for Indian students with post-study work visa opportunities.
Financial Services
Privileged access to Indian and EU financial services markets with predictable regulatory regime for investment and innovative services.
Business Services
Comprehensive coverage including management consulting, market research, technical testing, and other business support services.
Tourism & Construction
Enhanced market access for tourism-related services and construction activities, supporting job creation and skill development.
Maritime & Telecommunications
First-time binding of dredging and maritime cable-laying services, satisfying key EU economic interests. Comprehensive telecommunications commitments supporting digital economy growth.
Environmental Services
Commitments supporting green transition and environmental protection, aligning with climate goals.
EU Services Offer to India
India's offer on 102 subsectors covers EU priorities such as professional, business, telecommunications, maritime, financial, and environmental services. This provides EU businesses a predictable regime to bring investment and innovative services to India, enhancing exports and providing best-in-class services to Indian businesses.
Mobility Framework: Powering India's Talent Across Europe
The FTA establishes a comprehensive, assured regime for temporary entry and stay of professionals, strengthening India's position as a global hub for talent. This framework addresses one of India's key priorities and provides unprecedented mobility opportunities.
Business Visitors
Facilitated entry for business meetings, consultations, negotiations, and market research activities. Streamlined visa processes for short-term business travel.
Intra-Corporate Transferees (ICTs)
Ease of movement for employees (and their spouses and dependents) of Indian corporates established in the EU across all services sectors. This enables seamless deployment of skilled personnel for Indian companies operating in Europe.
Contractual Service Suppliers
Access to 37 subsectors including IT, business, and professional services for business entities providing services under contract to EU clients. Enables Indian firms to deploy personnel for project execution without establishing permanent presence.
Independent Professionals
Certainty in 17 subsectors covering IT, R&D, and higher education for independent professionals intending to provide services to EU clients. Creates expanded opportunities for knowledge-driven trade.
Student Mobility
Constructive framework enabling Social Security Agreements within 5 years with all EU Member States. Continuing conducive framework for entry of Indian students to study and avail post-study work visas, facilitating brain circulation and skill development.
Social Security Coordination
Commitment to develop Social Security Agreements within 5 years to address portability of benefits and avoid double contributions, making long-term assignments more viable for Indian professionals.
Mobility and Migration Agreement
A separate Mobility and Migration Agreement was signed alongside the FTA at the January 27, 2026 summit. This agreement substantially enhances legal pathways to the EU for Indian students and skilled workers, complementing the FTA's mobility provisions and reflecting the comprehensive nature of the India-EU strategic partnership.
Traditional Medicine: Historic Breakthrough for AYUSH Sector
The FTA provides a significant boost to Indian traditional medicine services and practitioners, representing a historic first in India's FTA engagements.
AYUSH Practitioner Access
In EU Member States where regulations do not exist, AYUSH practitioners will be able to provide services using professional qualifications gained in India. This opens new frontiers for Ayurveda, Yoga, Unani, Siddha, and Homeopathy practitioners.
Establishment Rights
Future certainty and locked-in openness for establishment of AYUSH wellness centres and clinics in EU Member States, enabling institutional presence for Indian traditional medicine.
Knowledge Exchange
Framework for greater exchange with EU to facilitate trade in Indian Traditional Medicine services, including potential for research collaboration and standardization efforts.
Sustainability, Climate & Innovation Framework
Carbon Border Adjustment Mechanism (CBAM)
CBAM was identified as one of the most contentious issues in negotiations. While India did not secure an exemption from CBAM, the FTA includes important safeguards and support mechanisms.
CBAM Impact & Provisions
Exposure: CBAM affects 0.2% of India's GDP, with iron and steel accounting for nearly 90% of exposed exports. Potential compliance costs estimated at USD 2-4 billion annually for hard-to-abate sectors including steel, aluminum, and cement.
FTA Safeguards Secured by India:
- Most-Favored Nation (MFN) Flexibility: Forward-looking assurance that any flexibilities extended by EU to third countries under CBAM will automatically apply to India
- Technical Cooperation: Enhanced cooperation on recognition of domestic carbon pricing mechanisms and accredited verifiers
- Recognition of Carbon Prices: Framework for India's future carbon trading system to be recognized and plugged into EU's system, avoiding double taxation
- Financial Assistance: Targeted support (€500 million over two years) to help Indian producers reduce emissions and adapt to carbon compliance requirements
- Non-Violation Clause: Protection mechanism - if new EU measures nullify FTA concessions, India has consultation rights and rebalancing rights if consultations fail
- Technical Dialogue Platform: Dedicated forum to address CBAM pathways for Indian industries to access EU markets despite the regulation
Trade and Sustainable Development
Climate Action
Climate Action Platform launches in H1 2026. Cooperation on renewable energies, maritime emissions reduction, and sustainable resource management.
Circular Economy
Shift to circular, resource-efficient economy. Protection of natural resources and sustainable industrial transformation support.
Green Hydrogen
$10B investment for 10 GW electrolyser capacity by 2030. EU's €2B commitment via EIB and €300B Global Gateway strategy.
Green Trade
Reduced tariffs on green goods and liberalized green services. Right to regulate for environmental and labor protection maintained.
Intellectual Property Rights & Innovation
TRIPS Compliance
Strengthened protections for copyright, trademarks, designs, trade secrets, plant varieties. Affirms Doha Declaration on TRIPS and Public Health.
Traditional Knowledge
Recognition of Traditional Knowledge Digital Library (TKDL) protecting indigenous innovations from biopiracy and misappropriation.
Technology Transfer
Framework for exchanging views on technology transfer laws, facilitating information flows and business partnerships.
Geographical Indications
Separate GI Agreement under negotiation to protect traditional iconic EU and Indian products from imitations.
Business Enablement, Digital Trade & Governance
SME Support Framework
Dedicated chapter to help small and medium-sized enterprises take full advantage of new export opportunities, recognizing that SMEs have fewer resources to navigate complex trade rules.
SME Contact Points
Dedicated contact points provide SMEs with relevant, up-to-date FTA information and identify opportunities for SME benefit.
Information Access
Centralized access to accurate guidance on setting up and doing business in partner markets enhances SME capacity.
Reduced Compliance Costs
Tariff reductions, removal of regulatory barriers, and transparency help SMEs streamline procedures and improve efficiencies.
Predictable Framework
Legal certainty and predictable regulatory framework particularly beneficial for SMEs with limited resources.
Digital Trade Provisions
Cross-Border Data Flows
Facilitation of cross-border data flows essential for digital services delivery, balancing trade with privacy protection.
Digitally Delivered Services
Focus on digitally delivered services with non-discriminatory treatment for digital services providers.
E-Commerce Framework
Provisions supporting electronic commerce and digital transactions with consumer protection and cybersecurity cooperation.
Regulatory Sovereignty
Both parties maintain right to regulate digital space for privacy, security, and consumer protection objectives.
Investment & Governance Framework
Investment Protection Agreement
A separate Investment Protection Agreement is being negotiated alongside the FTA, providing comprehensive framework for investment protection and facilitation. Enhanced investment protection and regulatory certainty attract high-quality FDI from Europe. The agreement provides a predictable and transparent regulatory environment facilitating long-term investments while preserving right to regulate for public policy objectives.
Joint Committee
Joint Committee oversees implementation, monitors operation, and addresses issues relating to interpretation and application of the FTA.
Dispute Settlement
Fair and effective dispute settlement mechanisms balancing investor protection and state sovereignty in regulation.
Safeguard Mechanisms
Bilateral Safeguards
Targeted response mechanism allowing temporary suspension of concessions if serious injury to domestic industry occurs from FTA.
Non-Violation Clause
Protection if new measures nullify FTA concessions. Consultation rights and rebalancing rights ensure agreement benefits preserved.
Right to Regulate
Explicit provisions allowing measures for public morals, public order, public health, security interests, and essential defense.
Confidential Information
Protection of confidential information with safeguards for law enforcement, public interest, and legitimate commercial interests.
Security and Defence Partnership
The FTA was accompanied by announcement of a Security and Defence Partnership, similar to EU partnerships with Japan and South Korea, establishing framework for cooperation across:
Maritime Security
Enhanced cooperation in Indo-Pacific and Mediterranean regions. Joint exercises and information sharing on maritime domain awareness.
Counterterrorism
Intelligence sharing and operational cooperation. Capacity building and best practices exchange.
Cyber Defence
Cybersecurity cooperation and resilience building. Protection of critical digital infrastructure.
Defence Procurement
Defence-industrial collaboration and co-production opportunities. Technology transfer in defence sector.
Strategic Autonomy & Geopolitical Context
The FTA forms part of EU Commission President von der Leyen's "strategic autonomy" agenda, which includes recent trade deals with Japan, Indonesia, Mexico, Switzerland, and Mercosur. This represents EU's effort to reduce dependence on both US and China while building resilient supply chains. The agreement positions India as attractive alternative for EU companies seeking to diversify from China under the "China-Plus-One" strategy, leveraging India's vast consumer market, youthful population, expanding manufacturing ambitions, and democratic values alignment.
Implementation Timeline & Next Steps
Post-Announcement Process
| Stage | Timeline | Details |
|---|---|---|
| Agreement Conclusion | January 27, 2026 | Negotiations concluded and agreement announced at 16th India-EU Summit in New Delhi |
| Legal Vetting & Translation | 5-6 months (through mid-2026) | Legal scrubbing, revision, and translation into English, Hindi, and all 23 official EU languages. All language versions equally authentic; English prevails in case of divergence. |
| Formal Signing | Expected mid-2026 | After legal vetting completion, formal signing ceremony by authorized representatives |
| Ratification Process | Mid-2026 through 2026-2027 | India: Approval by Union Council of Ministers EU: Consent of European Parliament and approval by Council of European Union (lighter process than mixed agreements requiring all 27 member state ratifications) |
| Entry into Force | Expected late 2026 or early 2027 | Indian Trade Minister Piyush Goyal indicated implementation expected by end of 2026. EU officials suggest early 2027 more realistic given ratification requirements. |
Ratification Outlook
Unlike the EU-Mercosur Agreement which faces significant political opposition and potential delays (European Parliament requested CJEU opinion potentially delaying 18+ months), the India-EU FTA is expected to face smoother ratification. The exclusion of sensitive agricultural sectors (beef, chicken, rice, sugar) from liberalization reduces political controversy. However, all trade agreements face scrutiny on labor standards, environmental commitments, and economic impact assessments during parliamentary review.
Conclusion: Reshaping Global Trade Architecture
The India-European Union Free Trade Agreement concluded on January 27, 2026, represents a watershed moment in global economic history—not merely as the largest trade deal concluded by either side, but as a definitive statement about the future of rules-based international cooperation in an era of rising protectionism and fragmentation.
With bilateral trade currently valued at USD 136.54 billion in goods (2024-25) and USD 83.10 billion in services (2024), the FTA provides concrete pathways for exponential growth. The European Commission projects EU exports to India will double by 2032, while India's unprecedented market access across 97% of tariff lines covering 99.5% of exports by value creates transformative opportunities for Indian businesses, workers, and entrepreneurs across all sectors.
As the world's largest democracies and major economies representing 2 billion people and 25% of global GDP, India and EU have demonstrated that patient diplomacy, mutual respect for sensitivities, and shared commitment to rules-based order can overcome even the most complex negotiations. The FTA marks not just a trade agreement, but a foundation for deeper economic integration, strategic autonomy, and long-term prosperity that will shape global trade architecture for decades to come.
The agreement stands as testament to what European Commission President von der Leyen called "the mother of all deals"—a comprehensive, balanced, and forward-looking partnership that proves rules-based cooperation still delivers great outcomes in a fragmenting world. As Prime Minister Modi stated, this partnership "will strengthen stability in the international system" at a time when such stability has never been more critical.