The European Union and India have signed an agreement creating a free trade zone with 2 billion people. The Free Trade Agreement (FTA) is, according to the European Commission, the largest agreement of its kind ever concluded by either party.
The FTA strengthens economic and political ties between the world’s second and fourth largest economies, and, like the recent trade agreement between the EU and Mercosur, took many years to reach. The EU and India began negotiations in 2007, suspended the process in 2013, and resumed in 2022.
The timing of the signing of both agreements is not unrelated to current geopolitical tensions and global economic challenges. The EU and India are committed to economic openness and rules-based trade, demonstrating a willingness to move in the opposite direction from the US, where the Trump administration has insisted on using tariffs as a means of leverage.
According to the President of the European Commission, Ursula von der Leyen, “the EU and India are making history today, deepening the partnership between the world’s largest democracies. We have created a free trade area with 2 billion people, in which both sides will benefit economically. We are sending a signal to the world that rules-based cooperation still produces great results. And, best of all, this is just the beginning – let’s build on this success and further strengthen our relationship.”
Annually, the EU and India already trade more than €180 billion in goods and services, generating around 800,000 jobs in the EU. Forecasts indicate that EU goods exports to India will double by 2032, eliminating or reducing tariffs on 96.6% of EU goods exports to India. Annually, tariff reductions save approximately €4 billion in taxes on European products.
India had never before granted such trade liberalization to a trading partner. In the EU’s industrial and agri-food sectors alone, companies will gain privileged access to the world’s most populous country, with 1.45 billion inhabitants, and the fastest-growing large economy, with an annual GDP of €3.4 trillion.
Furthermore, tariffs on automobiles will gradually decrease from 110% to as low as 10%. Auto parts will enjoy total tariff exemption within five to ten years, and tariffs on pharmaceutical products will also be virtually eliminated.
The agreement provides for dedicated contact points to provide SMEs with relevant information about the Free Trade Agreement (FTA) and assist them with any specific problems they may encounter when trying to use the FTA provisions. SMEs will also benefit from tariff reductions, the removal of regulatory barriers, transparency, stability, and predictability provided by the agreement.
Wine tariffs will be halved, dropping from 150% to 75% upon the agreement’s entry into force, and could reach 20%. Olive oil tariffs will be reduced from 45% to 0% over five years.
The European Commission guarantees that the FTA protects sensitive European agricultural sectors. Beef, chicken, rice, and sugar are excluded from the liberalization foreseen in the agreement. All Indian imports will continue to respect the EU’s strict health and food safety standards.
Also outside the FTA, but in parallel negotiations, the EU and India are seeking to define rules on Geographical Indications (GIs), which protect traditional and emblematic EU agricultural products from imitations.
Privileged access to service markets and protected intellectual property
EU companies will have privileged access to the Indian service market, including key sectors such as financial services and maritime transport.
The agreement will enforce and protect Intellectual Property (IP) rights, including copyrights, trademarks, industrial designs, trade secrets, and plant variety rights, based on existing international IP treaties. This will bring the intellectual property laws of India and the EU closer together, facilitating trade and investment between EU and Indian companies that rely on IP.
Improving Sustainability Commitments
The FTA also addresses trade and sustainable development, focusing on environmental protection and climate change, protecting workers’ rights and women’s empowerment. Other important points are dialogue and cooperation on environmental and climate issues related to trade.
The EU announced support of €500 million over the next two years to help India’s efforts in reducing greenhouse gas emissions and accelerating its long-term sustainable industrial transformation. The EU and India are also preparing a Memorandum of Understanding aimed at establishing an EU-India platform for cooperation and support for climate action, to be launched in the first half of 2026.
Next steps:
- The negotiated texts will now undergo legal review and translation into all official EU languages.
- The European Commission will then present its proposal to the Council for signature and conclusion of the agreement.
- After adoption by the Council, the EU and India will be able to sign the agreements.
- After signing, the agreement requires the consent of the European Parliament and the Council’s decision on its conclusion to enter into force.
- Once India also ratifies the Agreement, it will enter into force.
