In January 2026, India and the European Union announced the conclusion of a comprehensive free trade agreement after 19 years of negotiations. The deal signals deeper economic integration and strategic partnership amid global trade uncertainties, including US tariffs. It provides India preferential market access while addressing long-standing differences on tariffs and standards.
Negotiations for the India-EU Free Trade Agreement (FTA) began in 2007, a time when the global economic landscape was markedly different, with the iPhone just launched and pre-financial crisis stability. Nearly two decades later, on a crisp January day in 2026, both sides concluded talks on what has been called the 'mother of all trade deals.' This comprehensive pact covers trade, investment, defence cooperation, and supply-chain resilience, creating a trade zone for around 2 billion people representing 25 percent of global GDP. Formal signing awaits legal review, but the agreement underscores India's push for deeper global integration amid US President Donald Trump's protectionist policies, including a 50 percent tariff on Indian exports linked to purchases of Russian oil. The US has criticized the deal, arguing it indirectly supports Russian aggression. Under the FTA, India gains preferential access to 97 percent of EU tariff lines, boosting labor-intensive sectors like textiles and garments, where the EU market for ready-made garments is projected to reach $105 billion. India has committed to tariff reductions on 92.1 percent of lines, including cars from peaks of 110 percent to 40 percent initially, with a path to 10 percent, and similar treatment for wines and spirits. Sensitive sectors like dairy and farming are excluded, though India exported $4.2 billion in food and beverages to the EU in 2024, ranking 30th among suppliers due to stringent standards. The deal secures commitments in 144 services subsectors, including IT, education, and professional services, with a mobility framework easing movement for Indian corporate employees—vital amid US H-1B visa issues. Bilateral trade exceeded $190 billion in 2024-25, with India exporting $76 billion in goods and $30 billion in services. Beyond economics, it includes a Security and Defence Partnership for maritime security, counter-terrorism, and cybersecurity. Analysts view this as less a diplomatic triumph than a response to an unpredictable world, helping India diversify exports, wean from Russian dependence, and modernize regulations to align with EU standards. This positions India for future integrations like the CPTPP. Recent deals with New Zealand and upcoming talks with Canada further highlight India's shifting trade momentum, moving from perceived weaknesses in US negotiations to strategic upper hand.
