India–EU Free Trade Pact Sealed: A Landmark Deal Reshaping Global Trade Partnerships

InduQin
14 hours ago
6 min read

Concludes a historic India–EU FTA after two decades, strengthening ties amid global trade uncertainty.
Grants unprecedented duty concessions on over 99% of Indian exports, boosting labour‑intensive sectors and MSMEs.
Expands access to the $20‑trillion EU market, benefiting major Indian states and exports.
Enhances services trade, mobility, jobs, and Make in India, reinforcing a rules‑based global trade order.

India and the European Union have formally concluded a long-pending Free Trade Agreement (FTA), ushering in a new chapter in their economic relationship at a moment of heightened uncertainty in global commerce. Finalised on Tuesday after negotiations spanning more than two decades—and reinvigorated since 2022—the agreement was announced at the 16th India–EU Summit by Prime Minister Narendra Modi and European Commission President Ursula von der Leyen.

The timing of the pact is particularly significant. With global trade facing disruptions from aggressive tariff regimes, fragile supply chains and the continuing fallout of the Russia–Ukraine conflict, the India–EU FTA sends a clear message in support of diversified, rules-based trade. Together, India and the EU represent the world’s fourth- and second-largest economies, accounting for roughly a quarter of global GDP and close to one-third of international trade.

India will get an "unprecedented" market access at concessional duties for over 99 per cent of its exports by value in the European Union (EU) market, providing a boost to domestic labour-intensive sectors, Commerce and Industry Minister Piyush Goyal said on Tuesday.

The two sides announced on January 27 the conclusion of negotiations for the free trade agreement (FTA).

"India and the EU, under the leadership of PM @NarendraModi ji, European Commission President @VonderLeyen and European Council President @AntonioCostapm have inked the 'Mother of all Trade Deals'," he said in a social media post.

Goyal said that the pact is a strategic breakthrough in the country's global trade engagement, unlocking vast opportunities in the $20 trillion EU market for 1.4 billion people.

"It is a deal that gives unprecedented market access for over 99 per cent of our exports by value, providing a massive impetus to our labour-intensive sectors and bolstering Make In India," the minister said.

"With care being taken to shield sensitive sectors, rural livelihoods have also been secured while opening up potential to scale in the high-value EU market," he said, adding, "a big win has been secured in the services sector with a future-ready mobility framework that will help expand global opportunities for our skilled Indian professionals".

He added that this deal is a "gateway to the future" as it would enable India to create high-value jobs, drive innovation, and firmly cement its position as a globally competitive hub for talent and sustainable economic growth.

A Major Boost for Indian Exports and States

One of the most immediate outcomes of the agreement is expanded market access for Indian exports. Goods worth an estimated Rs 6.4 lakh crore will now benefit from entry into 27 EU member states under a unified trade framework, according to Union Commerce and Industry Minister Piyush Goyal. Manufacturing- and export-driven states such as Gujarat, Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh, Rajasthan, Punjab, Telangana, Andhra Pradesh, West Bengal, Assam and Kerala are expected to be among the biggest beneficiaries.

Labour-Intensive Sectors in Focus

The FTA is poised to deliver substantial gains for labour-intensive industries, significantly improving India’s competitiveness in the European market. Sectors set to benefit include textiles and apparel, engineering goods, pharmaceuticals, medical devices, electronics, chemicals, plastics, rubber, marine products, leather, footwear, gems and jewellery, handicrafts, tea, spices and other agricultural products.

Textiles and apparel: All tariff lines will move to zero duty immediately, granting Indian exporters direct access to the EU’s $263 billion textile market and strengthening livelihoods across the weaving and garment ecosystem.
Leather and footwear: Duties as high as 17% will be eliminated, opening doors to the EU’s $100 billion market and revitalising production clusters in Agra, Kanpur, Kolhapur and Ranipet.
Gems and jewellery: Complete duty-free access to a $79 billion premium market is expected to benefit key hubs in Gujarat, Rajasthan, Maharashtra and West Bengal.
Engineering and manufacturing: Preferential entry into the EU’s $2 trillion industrial market supports India’s goal of reaching $300 billion in engineering exports by 2030, with MSMEs across several states standing to gain.

Overall, tariffs of up to 10% on nearly $33 billion worth of labour-intensive exports will be phased out once the agreement takes effect.

Implementation Timeline and Strategic Vision

Speaking at a joint press conference in New Delhi, Piyush Goyal described the FTA as a “balanced, fair and win-win” outcome for businesses on both sides. He noted that momentum for the deal accelerated after the visit of EU Trade Commissioners led by Ursula von der Leyen in February 2025.

According to Goyal, the agreement will now undergo expedited legal review and translation into 24 languages, with the aim of bringing it into force within calendar year 2026. He emphasised that the pact opens up extensive opportunities for bilateral investment and deeper industrial collaboration.

Strengthening a Growing Strategic Partnership

Foreign Secretary Vikram Misri highlighted the broader strategic implications of the agreement, describing recent engagements with European leadership as historic. Over the past decade, India–EU relations have steadily deepened, reflecting shared concerns over supply chain concentration, protectionist trends, and the need for a more effective multilateral system.

As large, pluralistic democracies with open-market economies, India and the EU have committed to advancing this partnership not only for mutual benefit but also for wider global stability. Misri also underscored the symbolic importance of EU leaders attending India’s Republic Day celebrations as chief guests for the first time.

MSMEs, Jobs and the ‘Make in India’ Push

The FTA is expected to play a transformative role for micro, small and medium enterprises by integrating them more closely into global value chains and expanding their access to European markets. Job creation is anticipated across sectors, benefiting women, artisans, youth and skilled professionals.

Calling the agreement a defining milestone, Goyal said it secures unprecedented market access for over 99% of Indian exports by trade value, reinforcing the ‘Make in India’ initiative. Beyond goods, the deal includes substantial commitments in services and introduces a comprehensive mobility framework to facilitate the movement of skilled Indian professionals.

Services, Mobility and Emerging Technologies

In services, the agreement delivers meaningful access across areas such as IT and IT-enabled services, professional services, education, finance, tourism and construction. India will gain predictable entry into 144 EU service subsectors, while extending access to 102 subsectors for European firms.

The mobility framework eases movement for intra-corporate transferees, business visitors, contractual service suppliers and independent professionals, while also supporting student mobility and post-study work opportunities. Cooperation in forward-looking areas—artificial intelligence, clean technologies and semiconductors—is another key pillar, alongside measures to reduce non-tariff barriers through regulatory alignment and streamlined customs processes.

Trade Volumes and the Road Ahead

The EU remains one of India’s most important trading partners. In 2024–25, bilateral goods trade reached Rs 11.5 lakh crore ($136.54 billion), with Indian exports at Rs 6.4 lakh crore and imports at Rs 5.1 lakh crore. Services trade stood at Rs 7.2 lakh crore ($83.10 billion).

As India’s 22nd trade agreement, the India–EU FTA—alongside recent deals with the UK and EFTA—effectively opens the entire European market to Indian businesses. Aligned with the vision of ‘Viksit Bharat 2047’, the pact lays the groundwork for inclusive, resilient and future-ready growth, reinforcing India’s position as a trusted and influential player in global trade.

EU–India Partnership at a Glance

Shared Global Significance

The European Union and India are the world’s two largest democracies.
Together, they account for around 25% of the global population and nearly one-fifth of global trade.
Both partners work closely to promote economic growth, a rules-based international order, and sustainable development.

Trade in Goods

Overall Trade

The EU is India’s second-largest trading partner, after China and ahead of the United States.
It represents 11.5% of India’s total trade in goods.
In 2024, EU–India trade in goods exceeded €120 billion.

Trade Breakdown (2024)

EU imports from India: €71.4 billion
EU exports to India: €48.8 billion

Long-Term Growth

Over the past decade, bilateral goods trade has doubled.
EU imports from India rose by 140%, while EU exports increased by 58%.

Key Goods Traded

EU exports to India: machinery and appliances, transport equipment, chemicals
EU imports from India: machinery and appliances, chemicals, fuels

Trade in Services

Overall Trade

In 2024, EU–India trade in services was valued at over €66 billion.
Services trade has grown rapidly, more than doubling (+243%) over the last decade.

Trade Breakdown (2024)