New Delhi / Brussels —
India and the European Union have finalized a landmark Free Trade Agreement (FTA) after nearly 20 years of negotiations, forging one of the most ambitious trade pacts of the 21st century. Leaders from both sides have described the agreement as the “mother of all deals,” reflecting its scale, strategic importance, and potential impact on global trade. 

Unveiled on January 27, 2026, the deal binds India — home to 1.4 billion people — with the 27 nations of the European Union in a sweeping framework that could reshape economic partnerships and supply chains worldwide. Together, the two partners account for roughly one-third of global trade and nearly 25 percent of global gross domestic product (GDP). 

A Long Road to Agreement

Talks for a broad-based free trade pact first began in 2007 and encountered numerous pauses and complexities, including disagreements on tariffs, regulatory standards, and market access. After a renewed push in 2022, negotiators accelerated discussions, culminating in the comprehensive agreement announced this week. 

Key Components of the Deal

The India-EU FTA aims to liberalize trade in goods and services, expand investment flows, and strengthen economic cooperation across multiple sectors:

• Tariff reductions: India will eliminate or reduce duties on about 96.6 percent of goods imported from the EU, while the EU will scrap tariffs on approximately 99 percent of Indian exports over time. 

• Sector benefits: European exporters stand to gain from reduced duties on machinery, chemicals, pharmaceuticals, and automobiles, while Indian goods such as textiles, leather, gems and jewellery, engineering products, and seafood will see improved market access. 

• Service and investment liberalization: Beyond goods, the agreement fosters cooperation in services — including finance, transport, and professional sectors — and strengthens protections for investment and intellectual property. 

Impact on European Imports

Under the pact, dated tariffs that once reached 110 percent on EU automobiles imported into India are slated for phased reductions, potentially dropping as low as 10 percent over time, with an annual quota system in place for certain vehicle categories. Premium European wines and spirits, previously subject to steep levies, will also see significant tariff cuts. 

Strategic Economic Importance

For India, the deal represents a major step toward broadening export horizons beyond traditional markets and decreasing dependency on any single economic partner amid rising global protectionism. For the EU, access to India’s rapidly expanding consumer base presents fresh opportunities for European manufacturers and service exporters. 

European Commission leaders have underscored the pact’s potential to double EU exports to India by the early 2030s and to generate billions in tariff savings that could be reinvested into production, innovation, and employment. 

Next Steps

Although negotiators have reached the agreement in principle, it must still undergo ratification by the European Parliament, EU member states, and India’s domestic legal processes before full implementation — currently targeted for early 2027. 

Once in force, the pact is expected to recalibrate global economic dynamics, particularly as nations seek to diversify trade amid geopolitical tensions and protectionist pressures elsewhere.

SOURCES: Al Jazeera, The Guardian, Reuters, European Commission