India–EU trade agreement: Key highlights of the ‘Mother of all deals’

Mumbai | January 28

India and the European Union on Tuesday finalised a long-awaited Free Trade Agreement (FTA), marking a major milestone in India’s global trade strategy. The agreement was announced at the 16th India–EU Summit in New Delhi in the presence of European Commission President Ursula von der Leyen, bringing to a close nearly two decades of negotiations.

Prime Minister Modi said the pact sets a “new blueprint for common prosperity” amid geopolitical and economic volatility. The agreement is expected to come into force within a year.

Trade deal concluded after years of talks

Negotiations on the India–EU FTA were re-launched in 2022 after an 18-year pause. The pact has now been concluded as a comprehensive, rules-based agreement covering goods, services, mobility, digital trade, climate cooperation and MSMEs. 

India and the European Union on Tuesday announced the conclusion of negotiations for a comprehensive Free Trade Agreement at the 16th India–EU Summit in New Delhi, ending nearly two decades of negotiations. Talks were re-launched in 2022 and have now culminated in what both sides describe as one of their most ambitious trade pacts.

The agreement is expected to come into force within a year.

How big is the India–EU FTA?

• India and the EU are the 4th and 2nd largest economies globally
• Together, they account for 25% of global GDP and nearly one-third of global trade
• The pact is India’s largest free trade agreement so far

Trade at scale: Key numbers

In FY25, India–EU trade stood at:

• Goods trade: ₹11.5 lakh crore ($136.5 billion)
• India’s exports to the EU: ₹6.4 lakh crore ($75.8 billion)
• Services trade: ₹7.2 lakh crore ($83.1 billion)

Under the FTA:

• Over 99% of Indian exports by value will get preferential access to EU markets
• Nearly $33 billion of labour-intensive exports will see tariffs reduced to zero on implementation
• The EU expects its exports to India to double by 2032

What India gains

The FTA provides a strong boost to India’s export-led and employment-intensive sectors, including:

• Textiles and apparel
• Leather and footwear
• Marine products
• Gems and jewellery
• Handicrafts
• Engineering goods
• Automobiles

The agreement is expected to create opportunities for MSMEs, artisans, women, youth and professionals, while integrating Indian companies more deeply into global value chains. Sensitive sectors such as dairy and select agricultural products have been safeguarded.

India has also secured commercially meaningful access in services, with entry into 144 EU sub-sectors such as IT and IT-enabled services, professional services and education.

Services, mobility and workforce access

The FTA provides certainty of market access, non-discriminatory treatment and a focus on digitally delivered services, giving a boost to India’s services exports.

It establishes a facilitative mobility framework covering short-term, temporary and business travel. Both sides have made commitments for Intra-Corporate Transferees (ICTs) and business visitors, including entry and work rights for dependents.

The EU has offered access in 37 sectors for Contractual Service Suppliers and 17 sectors for Independent Professionals. India has also secured a framework to engage on Social Security Agreements over a five-year period. Additionally, practitioners of Indian traditional medicine will be allowed to work in EU countries where such practices are not regulated.

How the EU benefits

For the European Union, the agreement represents its largest-ever trade opening with India.

• Over 90% of EU goods exports to India will face zero or reduced tariffs
• EU exporters are expected to save up to €4 billion annually in duties
• Sectors such as automobiles, machinery, chemicals, pharmaceuticals and medical devices gain improved access
• The deal strengthens EU access to India’s fast-growing consumer and services markets

Automobiles and consumer impact

The agreement includes a calibrated, quota-based liberalisation for automobiles. India will reduce import duties on a specified number of EU vehicles, while the EU will phase out duties on Indian automobile exports.

This is expected to make premium European cars more affordable in India and increase competition and technology choices for consumers.

India–EU FTA: Major Tariff Adjustments

Beyond trade: Climate, digital and innovation

The FTA includes cooperation on climate action, including engagement on the EU’s Carbon Border Adjustment Mechanism (CBAM), along with technical and financial support to help Indian exporters adapt.

It also promotes digital trade, cooperation on cross-border electronic payments, stronger intellectual property protection, and collaboration in clean technologies, artificial intelligence and semiconductors.

Why it matters

The India–EU FTA strengthens economic and strategic ties between two major global powers at a time when global supply chains are being reshaped. Alongside India’s recent trade agreements with the UK and EFTA, the deal effectively opens up the entire European market for Indian exporters and businesses, marking a major step in India’s global trade integration.

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