What Happened
- India and the European Union concluded negotiations on a historic Free Trade Agreement (FTA) on 27 January 2026, the largest trade deal ever negotiated by either side.
- The agreement creates a free trade zone covering two billion people and nearly 25% of global GDP, described as the "mother of all deals."
- India will progressively eliminate or reduce tariffs on 96.6% of EU exports, including automobiles (from 110% to 40%, eventually to 10%), machinery, chemicals, and pharmaceuticals.
- A Security and Defence Partnership was also signed alongside the FTA, covering maritime security, counterterrorism, cyberdefence, and defence procurement.
- The deal is driven as much by geopolitics as by economics — both sides seek to reduce dependence on the US (under Trump's tariff policies) and China, stabilising the international order through closer strategic ties.
Static Topic Bridges
History of India-EU Trade Negotiations
India and the EU established a formal Strategic Partnership in 2004, and FTA negotiations began in 2007. The talks proceeded through 16 rounds but were suspended in 2013 over disagreements on automobile tariffs, wine and spirits duties, data protection for Indian IT firms, intellectual property rights, and government procurement rules. Negotiations were relaunched on 17 June 2022, this time also covering an Investment Protection Agreement and a Geographical Indications (GI) Agreement. The 14th and final formal negotiating round of the relaunched talks took place in October 2025, followed by political-level discussions that led to conclusion in January 2026.
- Strategic Partnership: Established 2004
- First round of FTA talks: 2007; suspended: 2013
- Relaunched: 17 June 2022 (with parallel Investment Protection and GI agreements)
- Final round: October 2025; concluded: 27 January 2026
- Previous sticking points: Auto tariffs (110%), IP rights, data localisation, labour standards
- India is the EU's 10th largest trade partner; the EU is India's 2nd largest trade partner
Connection to this news: The nearly two-decade negotiation journey underscores how geopolitical shifts — particularly concerns about US and Chinese unpredictability — finally provided the political will to close gaps that pure trade logic could not bridge.
Free Trade Agreements and India's Trade Policy
India has historically been cautious about FTAs, often citing concerns about trade deficits widening after liberalisation (as happened post-ASEAN FTA in 2010). India withdrew from the Regional Comprehensive Economic Partnership (RCEP) negotiations in 2019 over fears of Chinese goods flooding the market. However, India has recently shifted its approach, signing FTAs with the UAE (CEPA, May 2022), Australia (ECTA, December 2022), and EFTA states (March 2024), signalling a more proactive trade engagement strategy.
- India-ASEAN FTA: Signed 2010; India's trade deficit with ASEAN widened post-agreement
- RCEP withdrawal: November 2019; India cited Chinese import concerns
- India-UAE CEPA: Signed May 2022; India's first FTA in a decade at that time
- India-Australia ECTA: Signed December 2022
- India-EFTA (Switzerland, Norway, Iceland, Liechtenstein): Signed March 2024; includes $100 billion investment commitment
- India's merchandise exports (FY2024-25): ~$437 billion
Connection to this news: The India-EU FTA represents the culmination of India's recent pivot toward proactive bilateral trade engagement, and its scale dwarfs all previous agreements, potentially reshaping India's trade architecture.
EU's Common Commercial Policy and Global Trade Architecture
The EU conducts trade negotiations as a single entity through the European Commission, with the Common Commercial Policy being an exclusive competence of the EU under the Treaty of Lisbon. The EU has existing FTAs with Canada (CETA), Japan, South Korea, Vietnam, and recently concluded deals with Mercosur and New Zealand. The EU-Mercosur deal (concluded December 2024) and the EU-India FTA together represent a significant diversification strategy away from overdependence on the US and China in the current era of trade fragmentation.
- EU Common Commercial Policy: Exclusive EU competence under Treaty of Lisbon (2009)
- Major EU FTAs: Japan (2019), Canada (CETA, 2017), South Korea (2011), Vietnam (2020), Mercosur (2024)
- EU-India bilateral trade in goods and services: approximately EUR 180 billion
- The EU-India FTA aims to double EU exports to India by 2032
- EU tariff savings from the deal: up to EUR 4 billion annually
Connection to this news: The EU's simultaneous conclusion of the Mercosur and India FTAs signals a deliberate strategy of trade diversification, with the India deal being particularly significant given the combined market of two billion consumers.
Key Facts & Data
- FTA concluded: 27 January 2026 after negotiations spanning 2007-2013 and 2022-2026
- Combined market: 2 billion people, ~25% of global GDP
- India to reduce tariffs on 96.6% of EU exports
- Auto tariff reduction: From 110% to 40%, eventually to 10%
- EU-India bilateral trade: approximately EUR 180 billion
- Estimated EU tariff savings: up to EUR 4 billion annually
- Target: Double EU exports to India by 2032
- Security and Defence Partnership signed alongside the FTA
- Covers: Maritime security, counterterrorism, cyberdefence, defence procurement