New Delhi, 27 January 2026 – The European Union (EU) and the Republic of India have concluded negotiations on a long-awaited free trade agreement (FTA) after nearly two decades of talks, marking one of the most significant trade breakthroughs of the decade as both partners seek to deepen economic integration amid shifting global trade dynamics.
The pact, hailed by EU leaders as the “mother of all deals”, was finalised at a summit in New Delhi, where European Commission President Ursula von der Leyen and Indian Prime Minister Narendra Modi jointly announced the breakthrough. Once implemented, the agreement will create a free-trade zone encompassing nearly two billion consumers and cover roughly 25 per cent of global GDP.
The FTA signals a strategic shift in global commerce, coming as both Brussels and New Delhi seek diversification of trade partnerships in the face of rising protectionist pressures from the United States and ongoing economic competition with China.
What the Deal Means
Under the deal, tariffs on the vast majority of traded goods will be either eliminated or significantly reduced. The European Union is expected to eliminate or lower tariffs on about 96.6 per cent of its exports to India, covering key sectors such as machinery, electrical equipment, wine, and automotive products. India will reciprocate by cutting tariffs on nearly 99.5 per cent of its exports to EU markets, including textiles, chemicals, and gems.
One noteworthy provision will see tariffs on European-manufactured cars cut from historically punitive levels to a preferential rate under an annual quota, dramatically improving market access for EU automakers while still balancing India’s domestic protectionist sensitivities.
Economic and Strategic Impacts
Analysts predict the trade deal could double EU exports to India by 2032 and support new competitive opportunities for Indian exporters targeting Europe’s diverse consumer markets. It represents a significant opportunity for both economies to expand supply-chain linkages, attract foreign direct investment, and accelerate services and manufacturing growth.
The pact also includes commitments on regulatory cooperation, services liberalisation, and enhanced mobility for professionals, aimed at deepening economic ties and making trade more predictable and rules-based.
Context in Global Trade
The announcement comes at a moment of heightened geopolitical tension, particularly involving trade policies pursued by the United States. European officials have described the FTA as part of a broader strategy to reduce economic reliance on the US and China, opening pathways to resilient and diversified markets.
India, for its part, has pursued several ambitious trade agreements in recent months as it positions itself as a rising global trade partner, building on recent deals with the United Kingdom, New Zealand and the Gulf Cooperation Council.
Implementation Timeline
The agreement is expected to undergo legal vetting and ratification processes in both the EU and India over the coming months, with implementation anticipated within about a year. Once in force, it will reshape Indo-European commerce and could become a template for future mega-regional trade frameworks in Asia and beyond.
