After almost two decades of negotiations, India and the European Union (EU) have officially sealed a landmark trade pact in New Delhi on Tuesday, January 27, 2026. This "transformative" agreement, as it's being hailed, aims to align climate policy with commerce, marking a significant step towards sustainable economic cooperation between the two regions.
European Commission President Ursula von der Leyen has dubbed the agreement "the mother of all deals," emphasizing its potential to create a market of two billion people. The deal is expected to double EU exports to India by 2032. This free trade deal cuts tariffs on nearly 97 per cent of European goods by value imported to India.
The EU seeks to diversify its trading partners amidst a turbulent year for global trade, securing an agreement with India, the world's most populous country and one of the fastest-growing major economies. India's GDP currently stands at €3.5 trillion. The agreement reflects a compromise, with EU officials acknowledging that Brussels settled "for less that it wanted" in certain areas.
The EU-India Free Trade Agreement includes commitments to work together on climate change issues, such as renewable energies and reducing emissions in the maritime sector. It also focuses on the sustainable management of natural resources, including marine natural resources and forests. The agreement promotes cooperation to encourage a shift to a circular and resource-efficient economy. Dedicated provisions address forest conservation, biodiversity, illegal wildlife trade, illegal logging, and Illegal, Unreported, and Unregulated (IUU) fishing.
The agreement entails the elimination of tariffs, mostly within a decade, on key European exports to India, including machinery (the EU's main export), chemicals, and pharmaceuticals. While sensitive agricultural products are exempt on both sides, there have been notable tariff reductions for EU wine and spirits, a market previously closed with tariffs set at 150%. India, in turn, will not accept imports of dairy products to protect its own industry. New Delhi will benefit from eliminated tariffs on textiles, leather, gems and jewelry entering the EU, alongside easier access for Indian skilled professionals to work in Europe.
The strategic agenda covers key areas like prosperity and sustainability, technology and innovation, security and defence, connectivity and global issues. Both sides have expressed commitment to strengthening trade linkages and investment avenues, and enhancing global supply and value chains. They also aim to finalize an Investment Protection Agreement to provide high protection standards for investors and promote investment in future-oriented sectors, as well as an agreement on Geographical Indications to ensure effective protection of iconic products.
Cooperation will also be strengthened under the India-EU Clean Energy and Climate Partnership, focusing on energy technologies, smart grids, and climate diplomacy. The Joint Working Group on Energy Security will be reactivated to focus on diversifying reliable energy sources and promoting energy efficiency.
Implementation of the agreement is expected no earlier than early 2027, pending ratification by the European Parliament. The agreement addresses India's concerns about the Carbon Border Adjustment Mechanism (CBAM) through technical assistance for carbon pricing, though fundamental tensions between EU climate standards and Indian development priorities remain.
