From tariff cuts to export boost: What you should know about the historic India–EU FTA

India and the European Union have announced the conclusion of a long-awaited free trade agreement (FTA) on January 27, 2026.

The negotiations were concluded at the India–EU Summit in New Delhi, where Prime Minister Narendra Modi met with European Commission President Ursula von der Leyen and European Council President António Costa, who were on a state visit to India following their participation in the country’s Republic Day celebrations as chief guests.

Today is a day that will be remembered forever, marked indelibly in our shared history.

European Council President António Costa and European Commission President Ursula von der Leyen and I are delighted to announce the conclusion of the historic India-EU Free Trade Agreement.… pic.twitter.com/yaSlPm2b2L

— Narendra Modi (@narendramodi) January 27, 2026

Ursula von der Leyen called the deal "Mother of all deals" between two major global economies. She also said that closer EU–India integration could create a market of nearly two billion people, accounting for close to a quarter of global GDP.

Europe and India are making history today.

We have concluded the mother of all deals.

We have created a free trade zone of two billion people, with both sides set to benefit.

This is only the beginning.

We will grow our strategic relationship to be even stronger. pic.twitter.com/C7L1kQQEtr

— Ursula von der Leyen (@vonderleyen) January 27, 2026

The agreement comes at a time when the global trade is facing increased uncertainty amid renewed tariff pressures from the United States under President Donald Trump.

The European Union is one of India’s largest trading partners in goods and among its most important economic partners overall. Bilateral trade in goods stood at about €120 billion in 2024, accounting for roughly 11.5% of India’s total trade.

Notably, India ranks as the EU’s ninth-largest trading partner, representing about 2.4% of the bloc’s total goods trade. Trade in services reached €59.7 billion in 2023, nearly doubling from €30.4 billion in 2020. EU investment stocks in India amounted to approximately €140.1 billion in 2023.

Separately, EU exports to India are estimated to support around 800,000 jobs within the European Union.

Negotiations on the FTA, alongside parallel talks on an Investment Protection Agreement and an Agreement on Geographical Indications (GIs), were formally relaunched in 2022 after several years of stagnation.

While leaders initially aimed to conclude talks by the end of 2025, sustained political and ministerial engagement through 2025 and early 2026 helped bridge remaining differences, leading to the conclusion of negotiations on 27 January 2026.

According to the European Commission, this is the largest trade agreement ever concluded by the EU with a single partner and the most ambitious trade pact India has negotiated to date.

Under the FTA, India will reduce import duties on most goods coming from the European Union over time. Tariffs on approximately 96.6% of EU goods exports to India will be eliminated or reduced over time. The European Union estimates that the agreement could potentially double EU goods exports to India by 2032 and generate annual duty savings of around €4 billion for European exporters

Machinery and electrical equipment exports, valued at €16.3 billion in 2024 and currently subject to tariffs of up to 44%, will see tariffs reduced to zero for almost all products over a staging period of up to 10 years, with many reductions occurring within five to seven years. Aircraft and spacecraft exports, worth about €6.4 billion, will also be liberalised over staged timelines of up to 10 years, with several tariff lines eliminated earlier.

Tariffs on pharmaceuticals, chemicals, plastics, iron and steel, and optical and medical equipment will be phased out over periods that largely extend up to 10 years.

Under the FTA, India will cut import duty on premium cars priced above €15,000. The duty will first come down to around 30-35% when the agreement starts, and later reduce further to 10%. This benefit will apply only to 250,000 cars per year. Cars imported beyond this limit will continue to attract the current high duties, which go up to about 110%

Pearls, precious stones and metals will be subject to partial tariff elimination and reductions across product categories.

The agreement also delivers expanded market access for EU agri-food exports, where Indian tariffs currently average around 36% and can reach as high as 150%. Tariffs on products such as olive oil, vegetable oils, fruit juices, processed foods, chocolate, pastries and pet food will be reduced to zero. Wine tariffs, currently at 150%, will be cut to 20% for premium wines and 30% for mid-range wines, while tariffs on spirits will fall to 40% and those on beer to 50%.

Sensitive agricultural products have been excluded from liberalisation on both sides, and the agreement includes a bilateral safeguard mechanism to address import surges.

In services, the commitments undertaken by India under the FTA exceed those it has made in any previous trade agreement, including those with the United Kingdom and Australia.

For the first time, India has bound commitments in areas such as dredging and maritime cable-laying services. The agreement also includes provisions on transparency requirements for senior management and boards, strengthened intellectual property protections, and a dedicated chapter aimed at supporting small and medium-sized enterprises.

On the EU side, the EU will remove import duty on about 90% of Indian goods and this will increase to around 93% within 7 years. This means many Indian exports like textiles, leather, gems & jewellery and seafood will get near-zero duty entry into the EU market.

Some sensitive products have been kept outside the agreement. On the EU side, items like certain agricultural products such as dairy, rice and sugar are excluded from tariff cuts.

Parallel negotiations on investment protection aim to establish safeguards against expropriation without compensation, ensure non-discriminatory treatment of investors, and create a modern dispute settlement mechanism, while preserving each side’s right to regulate in the public interest.

The Geographical Indications Agreement, once concluded, is expected to protect traditional products and support rural communities in both India and the EU.

In recent years, India’s goods exports to the EU have typically ranged between roughly $70 billion and $80 billion annually, with imports from the bloc somewhat lower, depending on the year.

According to the reports, EU have sought stronger outcomes on intellectual property and data-related rules, while India has raised concerns over the EU’s Carbon Border Adjustment Mechanism (CBAM), arguing that it could function as an additional border charge on carbon-intensive exports and disproportionately affect micro, small and medium-sized enterprises.