India–EU Trade Pact Highlights: What The Deal Means For Tariffs, Exports, Climate Action And Market Access For Both Partners

India and the European Union formally concluded their long-awaited Free Trade Agreement (FTA) on 27 January, ending nearly 18 years of on-and-off negotiations and creating one of the world’s largest integrated trade markets, spanning nearly two billion people and around 25 per cent of global GDP.

Announced at the 16th India–EU Summit in New Delhi, the pact is expected to dramatically expand bilateral trade, currently valued at €186 billion annually, and push it beyond $250 billion within the next decade.

Prime Minister Narendra Modi described the agreement as “India's biggest and most historic free trade agreement”, adding, “This is not just a trade agreement. This is a new blueprint for shared prosperity.”

European Commission President Ursula von der Leyen called it the “mother of all deals” that creates “a free trade zone of two billion people.”

Key highlights of the India–EU FTA:

• European Union commitments:

  • The EU will eliminate or reduce tariffs on 96.6 per cent of its goods exports to India, translating into an estimated €4 billion in annual duty savings.

  • Tariff liberalisation will apply to 99.5 per cent of the value of EU imports from India, covering 96.8 per cent of EU tariff lines.

• India’s commitments:

  • India will liberalise tariffs on 97 per cent of goods imported from the EU, accounting for 92.1 per cent of tariff lines, with duties on nearly 30 per cent of trade value dropping to zero from day one.

  • More than 99 per cent of Indian exports by value will receive preferential access to the EU market, delivering a major boost to labour-intensive sectors worth around $33 billion.

• Trade growth expectations:
  According to the EU, the pact is expected to double EU exports to India by 2032. Currently, EU exports to India support around 800,000 jobs across member states, with further employment gains anticipated once the deal is implemented.

  The FTA spans several high-value and sensitive sectors, including alcohol, food and agricultural products, chemicals, machinery, pharmaceuticals and aerospace.

• Alcohol and Food Products:

  • Beer: Tariffs will be cut from around 110 per cent to 50 per cent.

  • Spirits: Duties will be halved initially, followed by a phased reduction to 40 per cent.

  • Wine: Tariffs on premium wines will fall from 150 per cent to 20–30 per cent over seven years; no concessions will apply to wines priced below €2.5.

  • Olive oil and edible oils: Duties on olive oil will be reduced from 45 per cent to zero over five years, with tariffs on vegetable oils and margarine fully eliminated.

  • Processed foods and beverages: Tariffs on non-alcoholic beer and select fruit juices (currently up to 55 per cent) will be phased out over five years, while duties on products such as confectionery, bread, pasta, chocolates and pet food (around 33 per cent) will be eliminated at entry into force or after staging.

• Industrial and Manufactured Goods:

  • Machinery and electrical equipment duties (up to 44 per cent) have been largely eliminated.

  • Aircraft and spacecraft tariffs removed for most products.

  • Medical, optical and surgical equipment have been made mostly duty-free.

  • Pharmaceuticals to see removal of 11 per cent tariffs on bulk imports.

  • Motor vehicle duties reduced from 110 per cent to 10 per cent, subject to a 250,000-unit quota.

• Major Gains for Indian Exporters:

  • Zero-duty access to the EU’s €263-billion textiles and apparel market, benefiting hubs in Tamil Nadu, Gujarat and Uttar Pradesh.

  • Full duty-free entry to EU market, eliminating tariffs of up to 26 per cent on Marine products.

  • Preferential access for gems and jewellery, leather goods, footwear and handicrafts, valued at over $33 billion.

  • Pharmaceutical shipments worth around $3 billion gain from streamlined regulatory pathways.

• Services and Professional Mobility

  The FTA delivers a major breakthrough in services:

  • Indian firms will now gain access to 144 EU services sub-sectors.

  • A structured mobility framework will now be in place for skilled professionals, business visitors and intra-corporate transferees.

  • Social security coordination set to avoid double contributions.

  • Provisions now allow Indian traditional medicine practitioners to work in EU states where regulations permit.

  • Securement of cross-border data flows under a dedicated Digital Trade chapter.

• Climate and Sustainability Commitments

  • Green finance: EU has pledged €500 million over two years to support India’s climate transition.

  • CBAM support: Technical working groups will help Indian exporters adapt to the Carbon Border Adjustment Mechanism.

  • MFN assurance: Parity guarantees will ensure Indian exporters receive treatment equal to other global suppliers on carbon compliance.

The agreement will now undergo legal vetting over the next 5–6 months, followed by formal signing in early 2027. Ratification by the European Parliament is expected to take up to a year before full implementation.

Both sides have positioned the FTA as a stabilising economic partnership amid shifting global supply chains and protectionist pressures elsewhere.

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