India and the European Union have concluded negotiations on a landmark Free Trade Agreement after nearly two decades of talks. The announcement came at the 16th India-EU Summit in New Delhi on 27 January 2026, with Prime Minister Narendra Modi hailing it as a milestone for both sides.

Formal signing is expected in about six months following legal reviews, with implementation likely by early 2027.

This deal creates a free trade zone spanning two billion people, positioning India’s largest trading partner—the EU—with bilateral trade exceeding €120 billion in 2024. India will eliminate or reduce tariffs on 96.6% of EU exports, while the EU will reciprocate for nearly 99% of Indian shipments by value.

Sectors like machinery, chemicals, pharmaceuticals, textiles, electronics, gems, leather, and auto components stand to gain significantly.

The agreement extends beyond goods to services, investments, digital trade, supply chains, telecom, finance, and e-commerce. Sensitive Indian sectors such as dairy, rice, spices, and poultry remain protected to safeguard farmers. It also includes pacts on security, defence collaboration, and mobility for Indian talent to Europe, alongside a five-year strategic agenda and 13 total agreements.

Experts view this as a pivotal shift in PM Modi’s trade policy. Senior Advisor at the Center for Strategic and International Studies (CSIS), Richard Rossow described the FTA as “a celebration,” explicitly highlighting Modi’s move away from protectionism towards openness. This comes after earlier criticisms of rising import tariffs and barriers to support domestic industries amid economic pressures.

Modi’s government had faced accusations of protectionism, including tariff hikes since 2018 to curb cheap imports, withdrawal from regional deals, and rules allowing bans on harmful goods.

These measures aimed to bolster small manufacturers and address deficits, but drew rebukes for punishing consumers and stifling competitiveness. The EU FTA signals a reversal, aligning with Modi’s past free-trade advocacy at forums like Davos.

The pact diversifies supply chains, reduces EU reliance on China, and taps India’s $4.2 trillion economy. For India, it marks the ninth trade deal in four years, countering global protectionism amid US tensions under President Trump. Projections suggest EU goods exports to India could double by 2032, saving up to $474 billion in duties annually.

Commerce Secretary Rajesh Agrawal called the agreement balanced and forward-looking, poised to boost trade, investment, and economic integration. It underscores India’s “Make in India” evolving with global partnerships, enhancing export competitiveness in key sectors. The EU sees India as a vital future market and tech-investment hub.

This development arrives at a critical juncture, with Ursula von der Leyen as Republic Day chief guest, elevating bilateral ties. Modi emphasised opportunities for India’s 1.4 billion citizens and EU millions. As negotiations on investment protection and geographical indications continue separately, the core FTA sets a template for future diplomacy.

The India-EU FTA exemplifies strategic pragmatism, blending protection for vulnerabilities with bold market access. It repositions India as a trade diplomacy leader, potentially reshaping South Asia-Europe economic dynamics. Analysts anticipate ripple effects on jobs, growth, and innovation across participating economies.

Agencies