India and the European Union are poised to significantly strengthen their relationship with the expected conclusion of a long-pending Free Trade Agreement (FTA) at the India-EU Summit on January 27, 2026. This development coincides with India's Republic Day celebrations, with top EU leaders attending as chief guests, underscoring the strategic importance both sides place on this partnership.
FTA Details and Anticipated Benefits
Negotiations for the FTA, which began in 2007 but were suspended in 2013, were relaunched in 2022 and have now reached a critical stage. European Commission President Ursula von der Leyen has described the proposed India-EU FTA as the "Mother of all deals," highlighting its potential to reshape bilateral trade and strategic ties. The agreement aims to eliminate tariffs on over 90% of traded goods, boost services, and facilitate investments between the EU and India. This would create a free market region of two billion people with a combined economic output of $27 trillion.
The FTA is expected to lower costs, deepen value-chain integration, and increase trade volumes, benefiting producers and consumers on both sides. It is anticipated that Indian exports to the EU, including smartphones, garments, pharmaceuticals, and auto parts, will largely replace the EU's imports from third countries. The EU, in turn, is expected to increase exports of high-end machinery, aircraft, core electronic components, and chemicals to India, which will support India's manufacturing and recycling industries.
Strategic Implications
The strengthening of India-EU ties occurs against the backdrop of a changing global order, with both sides seeking to diversify relationships and reduce reliance on any single nation. As the United States embraces tariffs and China implements export controls, the India-EU partnership signals a commitment to trade liberalization and a rules-based international order. The EU sees India as a crucial market for the future, while India views the EU as a vital source of technology and investment.
The India-EU Summit is expected to address security and defense ties, trade, technology partnerships, and connectivity issues. In addition to the FTA, the two sides are also looking at signing a security and defense partnership, covering maritime security, cybersecurity, and counterterrorism, as well as formalizing a comprehensive mobility framework to facilitate the movement of students, seasonal workers, and professionals.
Challenges and Considerations
Despite the optimism, some challenges remain. Market access and agriculture have been key sticking points in negotiations, with the EU seeking access for its dairy products and India protecting its agricultural sector. New Delhi also views the EU's Carbon Border Adjustment Mechanism as a form of green protectionism.
Looking Ahead
If signed, the FTA could enter provisional application within months, but full ratification by EU member states and the European Parliament might take 12-18 months, potentially making it fully applicable by late 2027 or early 2028.
The India-EU partnership is poised for durable consolidation, emerging as a stabilizing force in a multipolar world. This is reflected in the growing trade between the two entities, with bilateral trade volume reaching approximately $136 billion in 2024-25, making the EU India's largest goods trading partner. The upcoming summit and the anticipated FTA are expected to further solidify this strategic alliance.
