NEW DELHI: India and the European Union officially concluded a free trade agreement after almost two decades of negotiations, marking what leaders on both sides are calling a watershed moment in global trade. The pact was unveiled during the 16th India-EU Summit in the Indian capital. European Commission President Ursula von der Leyen described the agreement as the “mother of all deals,” saying it creates a free trade framework covering markets of nearly two billion people and roughly a quarter of global GDP.
Prime Minister Narendra Modi hailed the agreement as the “biggest free trade agreement in India’s history,” emphasising its potential to unlock new opportunities for Indian industry and services by expanding access to the EU’s 450-million-strong consumer market. Modi highlighted that the FTA represents a partnership of shared prosperity and reflects both sides’ commitment to strengthening economic ties and global stability.
The deal comes at a time of shifting global trade patterns. Both India and the EU face rising protectionism and tariff uncertainty from other major economies, and officials have tied this pact to broader efforts to diversify trade and reinforce supply-chain resilience.
What the deal includes
Under the terms of the agreement, tariffs on the vast majority of goods will be cut or phased out over time. India has agreed to reduce duties on almost 99 percent of its exports to the EU by value, while the EU will eliminate or lower tariffs on about 96.6 percent of its exports to India. Textiles, leather, marine products, chemicals, engineering goods and pharmaceuticals are among the Indian sectors expected to benefit most from the expanded access.
According to early reports and officials familiar with the negotiations, Indian import duties on EU-made cars will be progressively lowered, from rates as high as 110 percent down toward around 10 percent over a period of years, with specific quota arrangements for up to 250,000 vehicles annually. Such changes are expected to make European premium cars more competitive in the Indian market.
The pact also includes provisions to enhance cooperation in services, digital trade, and investment. Trade in services between India and the EU has already grown significantly in recent years, reaching nearly €60 billion according to recent estimates, with sectors such as IT and telecom expanding rapidly. The new agreement is expected to build on this foundation by providing clearer market access and regulatory alignment.
Government’s message and roadmap
Commerce and Industry Minister Piyush Goyal stressed the strategic importance of the pact for India’s export ambitions. He noted that the agreement will support India’s Make in India initiative and help integrate Indian firms more deeply into global value chains. Goyal indicated that the deal would now undergo expedited legal vetting and anticipates formal implementation by the end of 2026, subject to ratification by the European Parliament, EU member states and India’s own legislative processes.
Economic impact and trade outlook
Analysts say the agreement is expected to significantly boost bilateral trade, which last year stood at more than $135 billion in goods and services, with India running a trade surplus in several categories. Expanded access to EU markets is expected to lift Indian exports by tens of billions of dollars over the coming decade, particularly in labour-intensive sectors such as textiles and leather, while also attracting higher foreign direct investment flows into manufacturing and services.
Strategic and geopolitical significance
Beyond economics, the pact carries geopolitical weight. Former foreign secretary Shyam Saran commented that the FTA goes beyond trade and investment flows, bolstering India’s standing in a multipolar world and enhancing its strategic space amid global realignment. European and Indian leaders have framed the deal as a stabilising force in global trade, counterbalancing volatility and signalling trust and cooperation in a changing international order.
Industry voices have echoed this sentiment. Business leaders, such as Sunil Bharti Mittal, have described the agreement as a powerful signal of trust, stability, and long-term partnership and expressed optimism that it will create fresh avenues for joint projects in technology, digital infrastructure and beyond.
Sensitive sectors and safeguards
Sensitive sectors, including certain agricultural products such as dairy and rice, were excluded from full liberalisation due to domestic concerns on both sides. Safeguard mechanisms are expected to protect vulnerable industries as the tariff cuts are phased in.
What comes next
As the agreement moves toward formal signature and implementation, attention will shift to the detailed tariff schedules, the phasing-in periods for cuts, and the ratification processes in the EU and India. If the anticipated timeline holds, and subject to the completion of all legal and legislative procedures, the India-EU FTA could legally enter into force by late 2026 or early 2027, unlocking new prospects for trade and investment between two of the world’s largest economic blocs.
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