Following nearly two decades of negotiations, the European Union (EU) and India have declared a new era of economic partnership with the signing of a landmark Free Trade Agreement (FTA) on January 27, 2026. This comprehensive agreement, hailed as the "mother of all deals" by EU leaders, aims to strengthen ties, boost trade, and offer new opportunities for cooperation across various sectors.

The FTA is poised to reshape global trade dynamics, with the EU set to eliminate tariffs on 99.5% of items India exports, many dropping to 0% immediately upon the agreement's enactment. In return, India will grant tariff concessions on 97.5% of the value of goods traded between the two economies. This ambitious commitment to tariff liberalization is expected to generate annual duty savings of up to €4 billion for European suppliers.

One of the most significant outcomes of the FTA is the substantial reduction and elimination of import duties on a wide array of goods. Indian consumers can anticipate lower prices and expanded choices, particularly for European products like wine, spirits, beer, olive oil, and processed foods such as chocolates, breads, and confectioneries. Tariffs on processed foods, which were previously as high as 50%, will be entirely eliminated. Duties on wines are set to decrease from 150% to around 20% for premium categories.

The automotive sector will also witness significant changes. Import duties on cars will be gradually reduced from a peak rate of 110% to as low as 10%, albeit with volume limits. This move is expected to intensify competition within the Indian automotive market and provide consumers with a greater variety of options.

For India, the FTA is expected to boost key sectors including textiles, gems and jewelry, leather goods, pharmaceuticals, and high-tech engineering. Prime Minister Modi emphasized that the deal would significantly benefit manufacturing and the service sector, representing a substantial portion of global GDP and trade. The agreement aims to establish a future-ready trade framework that promotes innovation, enhances market access, and fosters sustainability for Indian businesses.

Ursula von der Leyen, the European Commission President, anticipates that EU exports to India will double as a result of this agreement. She also noted that European firms will gain unprecedented access to the traditionally protected Indian market, especially in financial services and maritime transport.

The FTA also addresses climate change, with the EU and India expected to sign a Memorandum of Understanding to establish a platform for cooperation and support on climate action. The EU is considering providing €500 million in support to India over the next two years to aid in reducing greenhouse gas emissions and accelerating sustainable industrial transformation.

While the agreement has been finalized and signed, it is expected to take effect sometime next year. The legal scrubbing of the text will take several months, followed by a formal signing. The agreement will then require ratification by both the European Parliament and the Indian government.

Despite the overall optimism, some sticking points were addressed during the negotiations, including the impact of the EU's carbon border tax on steel. India has also ensured that sensitive agricultural sectors like beef, sugar, and rice are protected from liberalization to safeguard domestic farmers.

In summary, the EU-India FTA represents a significant milestone in their relationship, promising increased trade, economic growth, and stronger cooperation on various global challenges. The agreement is expected to create a free trade zone of two billion people, offering benefits to both sides and promoting stability in the global order.