India-EU FTA: India and the European Union concluded negotiations on their free trade agreement on January 27, ending a process that began in 2007, stalled in 2013 and resumed in 2022. The agreement is now being legally reviewed. Both sides expect to sign it by the end of 2026 and bring it into force in the first quarter of 2027.
Christophe Kiener, the European Commission’s chief negotiator for the agreement, said at the Peterson Institute for International Economics that the pact could take effect by early summer next year. Commerce minister Piyush Goyal has set an earlier target. He said this week that India and the EU intend to complete the legal review within 15 to 20 days and make the agreement operational in the first quarter of 2027.
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This will be the largest trade agreement concluded by either India or the EU. It will connect markets with close to two billion people and about a quarter of global output.
The EU was India’s third-largest goods trading partner in 2025. Two-way goods trade was worth €118 billion, while services trade reached €67 billion in 2024. European companies held investments worth €132.8 billion in India at the end of that year. About 6,000 EU companies operate in the country.
India-EU FTA tariff cuts
India will eliminate or reduce tariffs on 96.6% of EU goods exports. The EU will give preferential access to more than 99% of Indian exports by value. These numbers are more useful than the share of tariff lines because they show how much existing trade will receive concessions.
The larger tariff cuts are on European industrial products. Indian duties on machinery and electrical equipment can reach 44%. Most will eventually fall to zero. Tariffs of up to 22% on chemicals and steel, 11% on pharmaceuticals and 11% on aircraft and spacecraft will also be removed on most products, generally over five to ten years.
The European Commission estimates that its exporters could save as much as €4 billion a year in Indian customs duties. It expects EU goods exports to India to double, though such forecasts depend on demand, exchange rates and whether firms use the concessions.
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India’s automobile concession is narrower than the headline tariff cut suggests. The duty on eligible EU cars will fall from as much as 110% to 10%, subject to an annual quota of 250,000 vehicles. The arrangement will favour European manufacturers such as Mercedes-Benz, BMW, Audi, Volkswagen, Renault and Stellantis. Cars made in Britain, including Rolls-Royce, Bentley, Aston Martin and Land Rover models, are not covered merely because the brands are European.
The quota and the transition period give India some protection against a sudden increase in imports. They also allow European manufacturers to test models in India before deciding whether to assemble them locally. The commercial effect will depend on the rules of origin, price bands and the schedule for reducing duties.
Indian consumers will get cheaper imported cars, machinery, medical equipment and some food products. European wine tariffs will fall from as much as 150% to 20-30%, while duties on spirits will decline to 40%. Olive oil will become duty-free. These concessions are large, but European food exports to India start from a small base.
Indian exports gain EU access
India’s gains are concentrated in industries that employ large numbers of workers. Textiles, garments, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles will receive better access to the EU market. The Indian government says about $33 billion of labour-intensive exports will move from tariffs of up to 10% to zero when the agreement takes effect.
Indian garment and footwear exporters have long competed at a tariff disadvantage against suppliers with preferential access to Europe. Bangladesh has benefited from the EU’s Everything But Arms scheme. Vietnam has an FTA with the bloc. Turkey trades with the EU through a customs union covering industrial goods.
Removing this disadvantage does not guarantee orders. European buyers also judge suppliers on delivery times, scale, product design, labour compliance and environmental standards. Indian firms will have to meet these requirements while competing with established suppliers.
The same qualification applies to pharmaceuticals and engineering goods. Lower tariffs help, but European standards and certification procedures remain demanding. Indian exporters that cannot document product quality, origin and environmental compliance will gain little from formal market access.
The agreement excludes or protects politically sensitive farm products. India has not offered access for dairy products, while the EU has retained protection for products such as beef, poultry, rice and sugar. The exclusions helped both sides finish the negotiations after earlier rounds had failed over agriculture, automobiles, wines and intellectual property.
India-EU FTA goes beyond customs duties
The agreement covers services, digital trade, intellectual property, customs procedures, rules of origin, small businesses and sustainable development. India has made services commitments in areas including financial and maritime services. The pact also contains provisions governing the temporary movement of skilled professionals.
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For many companies, customs procedures and product standards can impede trade as much as tariffs. Delays in testing, certification, licensing and customs clearance raise costs even when the formal duty is low. The agreement provides procedures for consultation and cooperation, but the actual benefit will depend on how customs departments and regulators administer them.
Climate rules will remain a source of friction. The FTA does not remove the EU’s Carbon Border Adjustment Mechanism, which affects carbon-intensive imports such as steel and aluminium. India secured provisions for dialogue and technical cooperation, not an exemption. Exporters will still have to measure emissions and bear the applicable carbon cost.
Separate India-EU negotiations on investment protection and geographical indications have not been concluded. The FTA therefore settles much of the trade relationship without resolving every dispute over investor protection, regional food names or climate measures.
Trade deal needs investment and scale
The agreement comes as the World Trade Organisation struggles to produce new market-opening agreements. India has responded by negotiating bilateral pacts with the UAE, Australia, the European Free Trade Association, Britain and now the EU.
For Europe, India offers a large market and another production base as companies reduce their dependence on China. For India, the EU offers purchasing power, technology and capital. The fit is stronger than the modest share each currently holds in the other’s trade.
Tariff reductions will not by themselves shift factories or supply contracts. European manufacturers will invest in India when the market, taxes, logistics and regulatory conditions justify the cost. Indian exporters will expand in Europe when they can supply the required volumes at consistent quality.
The legal review and ratification will determine when the concessions begin. Company decisions will determine how much they are worth.