Last Tuesday, January 27, the Free Trade Agreement between the European Union (EU) and India was finalized within the framework of the sixteenth bilateral summit, held in New Delhi.
The agreement covers two economies that together represent around 25% of global GDP, as well as almost a third of global trade. It is expected to enter into force later this year and help open the traditionally protectionist Indian market to the 27 EU member states, with a particular focus on the production, manufacturing, and services sectors. For Europe, the agreement goes beyond boosting exports; it is also a matter of economic resilience. The Indian economy, which has grown at an average rate of nearly 6% annually in recent years and has a young population of 1,45 billion, makes the country a strategic partner for Europe within a region that is increasingly consolidating itself as an economic powerhouse.
It is estimated that, thanks to the elimination or reduction of tariffs, which are currently imposed on 96,6% of goods, the agreement has the potential to double European exports to India by 2031. The measure could lead to savings of up to one billion euros for EU companies, thus facilitating access to the Indian market for priority European products such as cars and wine, in exchange for greater facilitation of Indian exports in sectors such as textiles, gems, and pharmaceuticals.
India's foreign trade policy
In response to the current international trade environment, which presents a series of challenges and changes to which adaptation is essential, India has implemented a series of economic policy reforms that will shape its economy for decades to come. Initiatives such as Make in India 2.0 promote the development of more than 27 different sectors and aim to position the country as an increasingly competitive exporter.
In 2023, India's foreign trade policy underwent substantial reform, with the primary objective of boosting exports to reach two trillion dollars by 2030. This new trade policy serves as a framework to support ease of doing business, reduce procedural bottlenecks, facilitate the digitalization of trade, and promote the competitiveness of its companies. In this way, the Indian economy is gradually moving from a domestically focused and defensive model to a more open and forward-looking approach.
One of the most significant aspects of this strategy is the shift in approach to signing Free Trade Agreements. In the last five years, India has signed 15 free trade agreements, including the one with the EU, as well as agreements with key strategic trading partners such as the United Arab Emirates (CEPA, 2022) and members of ASEAN. Agreements were also signed with the United Kingdom, New Zealand, and Oman in 2025, and the provisional agreement with Australia was expanded. An agreement with the United States is still under negotiation.
Bilateral relations between the EU and India
The relationship between the EU and India has historically been characterized by shared values and principles such as democracy, the rule of law, international order, and multilateralism. Cooperation between the two parties has always been diverse, covering a wide range of sectors. These include trade and investment, climate change, science and technology, digitalization, connectivity, and agriculture.
In the general context, diplomatic relations began to develop in the early 60s, with India being one of the first countries to establish relations with the European Economic Community in 1962. Later, the Joint Political Declaration signed in 1993, along with the Cooperation Agreement signed in 1994, paved the way for the strengthening of bilateral ties.
The institutional architecture between the two parties has been developing since the first EU-India Summit in 2000, with the relationship being elevated to a Strategic Partnership in 2004. To date, 16 bilateral summits have been held, with the agreement being finalized at the last of these.
Economic relations
On the other hand, the EU has been India's second-largest trading partner almost consistently, ranking behind China and ahead of the United States, accounting for approximately 11,5% of its trade in goods. Overall, this trade is characterized by a considerable trade deficit in India's favor: in 2024, EU imports reached €71,4 billion compared to India's exports of €48,8 billion. Despite this, over the past decade, trade between the two has more than doubled, benefiting both economies. EU imports have grown by 140%, while its exports have increased by 58%.
In terms of products, EU exports are primarily comprised of machinery and other equipment, chemicals, and fuels. India's main exports include machinery and equipment, transport equipment, and chemicals.
Bilateral trade in services between the EU and India has also grown significantly over the past decade, increasing by 243%, a trend opposite to that of goods. By 2024, its value had already exceeded €66.000 billion, of which €37.000 billion corresponded to European imports and €29.000 billion to Indian exports. The most traded services include telecommunications, information and computing services, business consulting, and transport services.
Regarding foreign direct investment, the EU has invested over €132.000 billion in India, establishing itself as one of the country's leading investors. Currently, more than 6.000 European companies operate in India, providing employment for over 3 million people across various sectors.
EU foreign direct investment in India exceeded €132 billion, making the Union one of the leading investors in the Asian country. There are more than 6.000 European companies operating in India, employing over 3 million people across various sectors.
The negotiation process
The negotiation process, which has concluded after nearly two decades of intermittent talks, began in 2007. Talks were suspended in 2013 and relaunched in 2022, after a nearly ten-year hiatus. The fourteenth and final formal round of negotiations took place in October 2025, followed by intersessional discussions of a technical and political nature. In parallel, negotiations were also initiated for an Agreement on Geographical Indications and an Investment Protection Agreement, processes which are still ongoing.
Contents of the Agreement
The Free Trade Agreement between the European Union and India establishes a balanced framework that combines market opening with protection against unfair trade practices. On the one hand, India will grant the EU unprecedented tariff reductions, eliminating tariffs on 86% of tariff lines and 93% by value. On the other hand, the EU will also eliminate tariffs on 90% of tariff lines and 91% by value. Furthermore, both parties will liberalize an additional number of tariff lines, reaching a liberalization level of 99,3% for the EU and 96,6% for India.
In the industrial sector, India will eliminate high tariffs, averaging over 16%, on products such as chemicals, cosmetics, plastics, auto parts, textiles and garments, ceramics, machinery, and ships. These reductions will be implemented immediately in some cases and gradually in others, over periods ranging from five to ten years, thus facilitating the entry of European products that previously faced very high tariff barriers.
The agreement also addresses the agri-food sector, historically sensitive in India. Tariffs will be eliminated on products such as olive oil, non-alcoholic beer, fruit juices, processed foods like confectionery, bread, cakes, and chocolate, as well as sheep meat, either immediately or in phases. Furthermore, market access will be improved for products such as wine, beer, other alcoholic beverages, and fruit, with the establishment of working groups for wines and spirits that will serve as a platform for cooperation and information exchange. The EU will protect its sensitive agricultural sectors through restrictions and quotas on certain products and will maintain its strict sanitary and phytosanitary standards.
The agreement includes strict rules of origin, similar to other trade agreements, ensuring that only products processed primarily in one of the parties can benefit from preferential tariffs. Measures will also be implemented to facilitate legitimate trade and guarantee that imports meet safety, health, and intellectual property requirements.
Furthermore, the agreement allows the use of trade defense instruments with a bilateral safeguard mechanism and expands opportunities in services, thus establishing clearer rules that create a predictable environment for suppliers.
In the digital sphere, rules are established that foster consumer confidence, protect software source code and strengthen consumer protection in e-commerce, including measures against spam, forced disclosure of sensitive information and ensuring high protection of intellectual property rights.
Fair competition is also strengthened through the regulation of public and private companies, provisions are included to facilitate the participation of SMEs, and binding commitments are integrated in sustainable development, environmental protection, combating climate change, labor rights, gender equality and the participation of civil society.
Security and defense association
Furthermore, the increased cooperation between the two parties has not only been reflected in the conclusion of the trade agreement, but has also been strengthened in the defense sector through the establishment of a Security and Defense Partnership. This partnership will enhance both sides' strategic cooperation, including collaboration on cybersecurity and joint naval exercises. Simultaneously, the launch of negotiations for an Information Security Agreement was announced, specifically designed to facilitate the exchange of sensitive information.
Next Steps
The Agreement will undergo legal review and translation into all official EU languages and must be approved by both the Council and the European Parliament. Simultaneously, it must be ratified internally in India. Its management will be overseen by a Joint EU-India Committee, which will monitor implementation, resolve interpretation issues, explore opportunities to expand trade, and coordinate specialized committees on technical and sectoral matters.
In this way, the agreement will constitute an important step in the trade relationship between the EU and India, by providing a stable framework for trade and investment, promoting the competitiveness of companies and laying the foundations for long-term, sustainable economic cooperation.
