What Happened
- India and the European Union concluded negotiations on a landmark Free Trade Agreement on January 27, 2026, in New Delhi — the largest FTA ever concluded by either side.
- The Commerce Secretary described the pact as "truly a mother of all deals," bringing together nearly one-fourth of global GDP and a combined market of two billion people.
- India will progressively eliminate or reduce tariffs on 96.6% of EU exports, covering sectors including automobiles, machinery, chemicals, pharmaceuticals, and aircraft.
- The EU will cut or eliminate tariffs on nearly 97% of European exports, projected to save up to EUR 4 billion annually in duties, with EU exports to India expected to double by 2032.
- The agreement emphasizes strategic complementarity — India's young population and growing demand paired with EU's technology and industrial base.
Static Topic Bridges
Free Trade Agreements (FTAs) — Types and India's FTA Strategy
A Free Trade Agreement is a pact between two or more nations to reduce or eliminate barriers to imports and exports among them. FTAs differ from other trade arrangements in their scope and depth.
- FTA vs CEPA vs PTA: An FTA covers goods tariffs; a Comprehensive Economic Partnership Agreement (CEPA) additionally covers services, investment, and regulatory cooperation; a Preferential Trade Agreement (PTA) offers only limited tariff concessions on select goods.
- India's existing FTAs/CEPAs include: India-UAE CEPA (2022), India-Australia ECTA (2022), India-ASEAN FTA (2010), India-Japan CEPA (2011), India-South Korea CEPA (2010), India-Singapore CECA (2005).
- India-EU FTA negotiations were first launched in 2007, suspended in 2013 over disagreements on tariffs, data localization, and services access, and resumed in June 2022.
- The agreement requires approval by the Council of the European Union, consent of the European Parliament, and approval by the Union Council of Ministers in India before entering into force.
Connection to this news: The India-EU FTA is the most comprehensive trade deal India has ever negotiated, covering 96.6% of tariff lines and encompassing goods, services, investment protection, and regulatory cooperation — making it closer to a CEPA in substance.
Most Favoured Nation (MFN) Principle and WTO Framework
The Most Favoured Nation principle under Article I of the General Agreement on Tariffs and Trade (GATT) requires WTO members to extend the same trade advantages (tariffs, market access) to all other WTO members equally. FTAs are a permitted exception under GATT Article XXIV, which allows regional trade agreements provided they cover "substantially all trade" and do not raise barriers against non-members.
- GATT Article XXIV requires FTAs to cover substantially all trade (generally interpreted as 90%+ tariff lines) and to be implemented within a reasonable period (typically 10 years).
- The Enabling Clause (1979 GATT Decision) allows developing countries to form PTAs with even more flexibility.
- India's average applied MFN tariff rate is approximately 18.1% (WTO data), among the highest for major economies.
- The EU's average applied MFN tariff is approximately 5.1%.
Connection to this news: India's commitment to eliminate tariffs on 96.6% of EU exports well exceeds the GATT Article XXIV threshold and represents a significant departure from India's traditionally protectionist trade stance, with tariff reductions on automobiles (currently 110%), machinery (up to 44%), and chemicals (up to 22%).
India-EU Bilateral Trade and Strategic Partnership
India-EU trade relations have expanded significantly over the past decade, with the EU becoming India's largest trading partner. The Strategic Partnership was established in 2004, upgraded through regular India-EU Summits. The Trade and Technology Council (TTC) was launched in 2023 as a parallel mechanism for cooperation on technology standards and digital governance.
- India-EU bilateral trade in goods stood at approximately $136.5 billion in FY2025 (€120 billion), with India exporting $76 billion and importing $60 billion from the EU.
- The EU is India's largest trading partner, accounting for 11.5% of India's total trade.
- Key Indian exports to EU: petroleum products, textiles, chemicals, pharmaceuticals, gems and jewelry.
- Key EU exports to India: machinery, transport equipment, chemicals, base metals.
- India-EU bilateral trade is targeted to rise to over $200 billion by 2030 following the FTA.
Connection to this news: The FTA builds on the India-EU Strategic Partnership and the Trade and Technology Council framework, aiming to create globally competitive value chains that serve both markets and the broader global economy.
Key Facts & Data
- FTA negotiations concluded: January 27, 2026, in New Delhi
- Combined market: 2 billion people, ~25% of global GDP (~$27 trillion combined)
- India's tariff elimination commitment: 96.6% of EU export tariff lines
- India-EU bilateral trade (FY2025): approximately $136.5 billion
- EU projected savings: up to EUR 4 billion annually in tariff duties
- EU exports to India projected to double by 2032
- Previous FTA talks: launched 2007, suspended 2013, resumed June 2022
- India's current tariffs on EU goods: automobiles (110%), machinery (up to 44%), chemicals (up to 22%), pharmaceuticals (11%)