India and the EU, on 27^th of January, concluded negotiations on their largest-ever free trade agreement¹, creating a commercially powerful pact that will form a free trade zone of two billion people.² The goal is to increase trade between India and the EU at a time when global trade is under pressure, especially due to the US tariffs.³

What Does It Mean

Being hailed as the “mother of all trade deals”⁴, the India–European Union Free Trade Agreement (FTA) is expected to bring a qualitative shift in deepening bilateral ties across a wide range of sectors.⁵ The agreement is the largest trade deal ever concluded by either India or the EU, coming at a time when both sides are contending with increasingly erratic trade policies from a key partner, the US.⁶

The European Union is India’s largest trading partner. Bilateral trade in goods stood at $136.53 billion in FY25, with Indian exports valued at $75.85 billion and imports at $60.68 billion. The idea of a trade agreement between India and the EU was first floated nearly two decades ago. After 15 rounds of negotiations, talks stalled in 2013, before being revived in 2022, culminating in the present agreement.⁷

The FTA marks a watershed moment in India’s trade strategy, opening preferential access to one of the world’s largest markets while carefully balancing domestic sensitivities, sustainability considerations, and regulatory safeguards.⁸ Under the agreement, the EU is expected to double its exports to India by 2032, with tariffs being eliminated or reduced on 96.6% of traded goods by value. On its part, the EU will cut tariffs on 99.5% of goods traded over a seven-year period, including reducing tariffs to zero on Indian marine products, leather goods, chemicals, rubber, base metals, and gems and jewellery.⁹ At the same time, India has ring-fenced sensitive sectors such as dairy, poultry, cereals, and select agricultural products, reflecting a calibrated and cautious negotiating stance.

The agreement is expected to significantly benefit India’s agricultural and processed food sector. Preferential market access for products such as tea, coffee, spices, grapes, gherkins, cucumbers, dried onions, fresh fruits and vegetables, and processed foods is likely to enhance their competitiveness in the EU market.¹⁰

A key component of the FTA relates to the automobile sector. Tariffs on European cars-currently as high as 110%-will be reduced to 10% under a quota-based system (250,000 vehicles). This opens fresh opportunities for European automakers such as Mercedes-Benz, BMW, Audi, Volkswagen, Porsche, Citroën, Renault, and Volvo to expand their footprint in India, now the world’s third-largest car market.¹¹ Reduced tariffs are expected to improve access to high-technology and premium vehicles, while increasing competition in the luxury segment.¹² Beyond fully built vehicles, the FTA provides for a phased elimination of import duties on auto components over a period of 5–10 years, supporting technology transfer and giving a boost to India’s electric vehicle and advanced manufacturing ecosystem.

To safeguard health standards and food safety, the EU will increase audits and strengthen border controls on imported food, animal, and plant products, while reinforcing inspections and compliance checks, particularly with respect to pesticide use and animal welfare.¹³

The two sides have also concluded a labour mobility agreement, opening opportunities for young professionals and seasonal workers, and have committed to launching talks on India’s participation in the EU’s Horizon research programme.¹⁴

Overall, the agreement is expected to elevate bilateral ties, enabling both parties to better navigate geopolitical turbulence and global trade disruptions. Although the deal has been finalized, the official signing is expected in about six months, subject to legal scrubbing of the text¹⁵ and ratification by the European Parliament¹⁶, with the FTA likely to enter into force sometime next year¹⁷.