In a move hailed as a significant boost to global trade and strategic partnerships, India and the European Union (EU) have finalized a landmark Free Trade Agreement (FTA). Prime Minister Narendra Modi announced the agreement on Tuesday, January 27, 2026, calling it the "mother of all deals". The agreement, which has been nearly two decades in the making, is expected to reshape economic ties between the two regions and create the world's largest free trade area.

The FTA is projected to integrate a market of over 1.9 billion consumers and represent approximately 25% of the world's Gross Domestic Product (GDP). According to the Prime Minister, this agreement signifies a major opportunity for the people of both India and Europe.

The agreement aims to enhance collaboration across key policy areas, including trade, security and defence, clean energy transition, and people-to-people cooperation. It is expected to provide a significant boost to Indian exports, particularly in labor-intensive sectors such as textiles, chemicals, gems and jewellery, leather, footwear and electrical machinery. Many of these sectors currently face EU tariffs of around 10%, which limits their competitiveness in European markets. The FTA will grant preferential or duty-free access to these exports, enhancing their position in the EU market.

For the EU, the FTA provides access to India's rapidly growing economy and includes substantial reductions in India's high tariffs on European goods, such as cars and auto parts. Sources indicate that India plans to reduce tariffs on imported cars from the EU from as high as 110% to 40%. This will provide a major opening for European companies operating in India.

Commerce Secretary Rajesh Agrawal stated that the negotiations for the India-EU trade deal have concluded successfully. The formal signing of the deal is expected to occur in approximately six months, following legal review. The agreement is anticipated to take effect sometime next year.

Beyond trade in goods, the agreement covers investment protection and geographical indications. The EU is already India's leading foreign direct investor, and this agreement is expected to solidify that position. Furthermore, the partnership extends into security and defense, with leaders expected to sign a Security and Defence Strategic Partnership.

The India-EU FTA is viewed as a strategic move to diversify trade ties and reduce reliance on other major economies. The agreement is a comprehensive one, encompassing 24 chapters that include goods, services and investment.