India and the European Union (EU) on Tuesday announced the successful conclusion of negotiations for a historic free trade pact, opening up markets to each other in an uncertain global trade landscape.
Both countries, however, kept sensitive agricultural products out of the Free Trade Agreement (FTA), billed as the ‘mother of all trade deals’ for its scale, scope and strategic weight. India for example, has shielded dairy, cereals, poultry, soymeal, certain fruits and vegetables, while the EU has protected beef, sugar, rice, chicken meat, milk powder, honey, bananas and soft wheat, on which current tariffs will be maintained. India will, however, get better EU market access for its tea, coffee, spices and processed food, while opening up domestic market for EU spirits, wine and olive oil.
The EU has kept its carbon border tax system out of the scope of the trade deal. The external affairs ministry said in a note that the FTA opens the way for “constructive engagement” on the subject. The deal also covers a mobility framework easing entry for employees of Indian companies in EU, Indian professionals serving EU clients and for Indian students to study in EU and avail of post-study work visas.
The deal announced jointly by Prime Minister Narendra Modi and European Commission president Ursula von der Leyen at the 16th India-EU Summit in New Delhi, follows negotiations relaunched in 2022 after talks first began in 2007. It positions India at the centre of one of the world’s largest integrated economic partnerships, covering a combined India-EU market of nearly two billion people and close to a quarter of global GDP.
From India’s perspective, the agreement delivers unprecedented market access, with over 99% of Indian exports by trade value set to receive preferential or duty-free entry into the EU market.
Exports worth nearly $75 billion annually are expected to benefit, with labour-intensive sectors accounting for about $33 billion of exports seeing immediate gains. These include textiles and apparel, leather and footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles.
On a weighted average basis, the tariff levied by India on products imported from the EU stands at about 9.6%, while the same on Indian goods in EU is around 3.6%. Once the FTA takes effect, India will bring nearly 96% of EU goods to zero tariff, while the EU will eliminate duties on about 98% of Indian goods.
At an India-EU business forum meeting, Modi described the deal as a symbol of “unprecedented alignment”. This deal will drive trade, investment and innovation while strengthening India-EU strategic relationship, Modi said in a social media post. “It reflects our shared resolve to shape a stable, prosperous and future-ready economic relationship,” Modi said.
“The EU and India make history today, deepening the partnership between the world’s biggest democracies. We have created a free trade zone of 2 billion people, with both sides set to gain economically. We have sent a signal to the world that rules-based cooperation still delivers great outcomes. And, best of all, this is only the start – we will build on this success, and grow our relationship to be even stronger,” said Ursula von der Leyen, President of the European Commission.
Union commerce minister Piyush Goyal told reporters at a briefing, “This is a wonderful agreement. It will be taken up for legal scrubbing on a fast-track basis, as we discussed today. We hope to be able to celebrate the entry into force of this agreement within the calendar year 2026.”
In textiles and apparel, EU tariffs of up to 12% will be eliminated, sharply improving competitiveness for Indian garment and home textile exporters. Leather goods and footwear will move to zero duty from earlier tariffs of up to 17%, providing relief to a cost-pressured sector. Gems and jewellery will see near-complete tariff elimination, easing access for cut and polished diamonds and jewellery into high-value EU markets.
Maroš Šefčovič, EU trade commissioner, described the deal as the biggest FTA ever. “High tariffs down, opportunity unleashed. It proves that hard work pays off, that win-win trade is real, and that genuine partnership—including with my counterpart, Minister Piyush Goyal—is always worth the effort. Now, our focus is clear: ensuring businesses reap tangible benefits from this FTA as quickly as possible,” said Šefčovič.
Marine products, including shrimp and seafood, will gain zero-duty access on most tariff lines, replacing earlier EU duties of 20–26%. In pharmaceuticals, duties will be reduced to near zero for almost all products, strengthening India’s position as a key supplier of affordable generic medicines to Europe.
Manufacturing-linked exports will also see broad tariff liberalization, with engineering goods, machinery components, iron and steel products, chemicals, plastics and rubber goods moving to zero duty on most product lines over phased timelines, supporting Make in India and deeper integration into European supply chains.
Beyond goods, India secures major gains in services and mobility. The FTA provides predictable and non-discriminatory access across 144 EU services subsectors, including IT and IT-enabled services, professional services, education, financial services, tourism, construction, R&D and other business services.
A future-ready mobility framework facilitates the movement of skilled professionals, intra-corporate transferees and business visitors, with provisions for dependents, student mobility and post-study work opportunities, alongside commitments to engage on social security arrangements over a five-year horizon. India has also secured access for practitioners of Indian traditional medicine to work under home title in EU member states where such practices are not regulated.
From the EU’s perspective, the agreement delivers sweeping tariff cuts across nearly all major export sectors. India will eliminate or sharply reduce tariffs on over 90% of EU goods exports, covering 96.6% of trade value, a move expected to double EU exports to India over time and save European exporters up to €4 billion annually in duties.
Tariffs on passenger vehicles will be cut from 110% to 10% under a quota of 250,000 units a year, while duties on car parts will be eliminated over five to ten years. Machinery and electrical equipment tariffs of up to 44% will fall to zero for almost all products, largely within five to seven years. Aircraft and spacecraft duties of up to 11% will move to zero, mostly within five years.
Chemicals (up to 22%) and pharmaceuticals (11%) will see duties reduced to zero for almost all products, while optical, medical and surgical equipment tariffs of up to 27.5% will be eliminated on 90% of products. Plastics (up to 16.5%) and iron and steel (up to 22%) will also largely move to zero duty.
In agri-food, wine tariffs will fall from 150% to 20% for premium wines and 30% for mid-range products, spirits duties will be capped at 40% from up to 150%, beer tariffs will be reduced from 110% to 50%, olive oil tariffs will drop from up to 45% to zero, and duties of up to 50–55% on processed foods, fruit juices and non-alcoholic beer will be eliminated.
Tariffs on kiwis and pears will fall from 33% to 10% within quotas, while sheep meat tariffs will be cut from 33% to zero and sausage and meat preparation tariffs reduced from up to 110% to 50%. Sensitive agricultural sectors will remain protected, with the EU maintaining tariffs on products such as beef, sugar, rice, poultry and dairy, alongside calibrated quotas and safeguard mechanisms.
Beyond tariffs, the agreement addresses non-tariff barriers through enhanced regulatory cooperation, streamlined customs procedures, and stronger sanitary and phytosanitary disciplines.
Carbon tax and EU’s support to cut carbon emissions
Forward-looking provisions in the deal secure commitments on dialogue and technical cooperation around EU’s carbon border adjustment mechanism (CBAM), along with financial and targeted support to help Indian exporters meet emerging carbon requirements.
Commerce secretary Rajesh Agarwal said that CBAM is a horizontal regulation that applies to all partner countries across the globe. He said that under the FTA, certain understanding has been reached on CBAM, including an agreement to set up a technical dialogue that will address pathways for Indian industries to access the market despite the regulation being in place. He added that both sides will work together to ensure that CBAM verifiers in India are accredited by the EU agencies, enabling Indian industry to access them.
Agarwal further said that the two sides will also work closely to understand the technical processes through which carbon measurement and taxation will be carried out in both economies.
He said the technical group will also ensure that any Indian carbon trading system that comes up in the future is taken into account and plugged into the CBAM framework, so that industries participating in India’s emerging carbon trading ecosystem have their carbon costs accounted for. He added that, importantly, the EU has committed that any flexibility extended under CBAM to any partner country in the future would automatically apply to India as well, providing forward-looking comfort.
The European Commission stated that the deal envisages up to €500 million in EU support over the next two years to help India reduce greenhouse gas emissions and accelerate its transition to cleaner, more sustainable industry and technology, including efforts tied to climate and green transition objectives.
Intellectual property provisions reaffirm flexibilities within the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement, recognize WTO’s Doha Declaration and explicitly acknowledge India’s digital library which documents traditional knowledge, while also supporting cooperation in artificial intelligence, clean technologies and semiconductors.
According to official data, India–EU bilateral trade in goods in 2024–25 stood at $136.5 billion, with Indian exports of $75.8 billion and imports of $60.7 billion, while services trade reached $83.1 billion. India and the EU together account for around 25% of global GDP and nearly one-third of global trade.
With this agreement, the EU becomes India’s 22nd FTA partner, and officials said the India–EU deal, along with FTAs with the UK and EFTA, effectively opens up the entire European market for Indian businesses. The agreement will now undergo legal vetting and ratification before being signed and entering into force, after which it is expected to reshape India’s trade engagement with Europe and reinforce its position as a trusted, forward-looking global partner.
“The India-EU FTA builds on a significant economic corridor. Together, India and the EU represent a combined GDP of $23.1 trillion in 2024, rising to $27.3 trillion by 2026. The trade relationship is already deep, with about €180 billion in annual two‑way trade in 2024, including €120 billion in goods and €60 billion in services,” said Arun Singh, global chief economist, Dun & Bradstreet.
“We saw the early pull in 2025. Europe’s share of our India‑related client inquiries increased from around 1 in 10 in 2024 to more than 3 in 10 in 2025. As the FTA moves through legal scrubbing and ratification, with implementation expected in early 2027, we expect this rising interest to translate into more due diligence, supplier onboarding, and cross‑border trade activity,” he said.
Christophe Hansen, EU Commissioner for Agriculture and Food said in a statement that under the deal, European wines, spirits, beers, olive oil, confectionary, and other products will enjoy preferential access to the rapidly growing Indian market. “Front and centre to these negotiations, was maximizing new opportunities for our unmatched European products, while protecting European farmers. That is why the tariffs on the most sensitive products such as beef, sugar, ethanol, rice and poultry will remain in place,” said Hansen.
“As in any trade agreement, our high food safety standards are fully maintained. The safety of EU consumers is non-negotiable,” said Hansen.
Ajay Srivastava, co-founder of Global Trade Research Initiative, a thinktank, said the FTA is a commercially significant deal that locks in deep tariff cuts and strengthens access to one of the world’s richest markets, especially for India’s labour-intensive exports such as garments and footwear, while opening India further to European wines, automobiles and industrial goods over time. “Strategically, it anchors India–EU economic ties in a more predictable, rules-based framework at a moment of global trade fragmentation,” said Srivastava.
“Historically, India’s apparel exports have been at a disadvantage in the EU market as competing countries enjoyed tariff-free access, while Indian shipments faced duties of 9.96% under the GSP regime and around 12% after its withdrawal, hurting price competitiveness despite strong quality and compliance capabilities. The proposed removal of this tariff under the India–EU FTA is a significant positive step that will help level the playing field, catalyse fresh investments in synthetic raw materials, modern processing technologies and capacity expansion, and over time strengthen India’s position as a reliable, compliant and scalable supplier to the European market,” said Pallab Bannerjee, managing director, Pearl Global Industries Ltd.
Next steps
On the EU side, the draft text of the agreement will undergo legal checks and be translated into all official EU languages. After this, the European Commission will seek approval from the EU Council to sign and conclude the agreement. Once the Council approves, India and the EU can formally sign the deal. The agreement will then need the consent of the European Parliament and a final decision by the Council before it can come into force. It will take effect only after India also completes its ratification process.
On the Indian side, the draft text of the agreement will be placed before the Union Cabinet for approval. Once the Cabinet clears the agreement, India will complete its ratification process, after which the deal will be eligible to enter into force.
India and the European Union first began negotiations for a free trade agreement in 2007. The talks were put on hold in 2013 and resumed in 2022. The 14th and final formal round of negotiations was held in October 2025, followed by discussions at the technical and political levels.
Alongside the relaunch of the FTA talks, India and the EU also initiated negotiations on a Geographical Indications agreement and an Investment Protection Agreement, which are still under negotiation.