India-EU Free Trade Agreement

On 27th January 2026, at the 16th India-EU Summit, India and the European Union concluded negotiations on the long-pending India-EU Free Trade Agreement (FTA).

The agreement was finalised nearly two decades after negotiations first began, reflecting a major shift in India-EU economic relations.

India-EU Trade Profile at a Glance

Area	Details
Bilateral Trade	India-EU merchandise trade stood at $137 billion in 2024-25, with India exporting $76 billion and importing $61 billion.
India’s Exports	Manufactured goods, energy products, pharmaceuticals, textiles, gems and jewellery.
India’s Imports	Aircraft, advanced machinery, nuclear reactor components, and other high-tech capital goods.

Under the FTA

Commitment	Details
India’s Commitment	India will eliminate duties on 93% of EU imports by value.
EU Commitment	The EU will eliminate duties on 99% of Indian exports.

Key Indian Sectors Poised to Gain

Labour-Intensive Manufacturing: Textiles, apparel, leather goods, footwear, gems and jewellery gain from tariff elimination and possible diversion of orders from Bangladesh and Vietnam.
Electronics and Engineering Goods: Removal of tariffs up to 10% improves price competitiveness.
Rubber and Automotive Inputs: India’s strength in natural rubber supports integration into global tyre and automotive value chains.
Pharmaceuticals: Rising healthcare demand in Europe and uncertainty in the US market increase the structural importance of India’s pharma exports.

Sectors Likely to Face Pressure

Automobiles: Import duties on European cars will decline gradually from 70-100% to 10-40%.
Wines and Spirits: Tariffs will reduce from 150% to 20% in phases.
Gourmet and Specialty Foods: Lower tariffs on cheese, chocolates, olive oil, and processed foods may pressure Indian artisanal and small-scale producers.

The Underplayed Dimension: Services and People

Professional Mobility: Easier movement for Indian engineers, IT professionals, doctors, researchers, and traditional medicine experts.
Student Mobility & Post-Study Work: The FTA creates pathways for Indian students to study and work in Europe.

PT Facts

Major Trade Pact: The EU is India’s third-largest trading partner, making the FTA strategically significant.
Offensive Interests: India’s strengths include textiles, pharmaceuticals, and engineering exports.
Sensitive Sectors: Automobiles, wines, and dairy-linked gourmet foods remain politically and economically sensitive.
Beyond Goods: The FTA also focuses on services, mobility, and post-study work opportunities.

Source:

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