INDIA - EU FREE TRADE AGREEMENT (FTA)

On January 27, 2026, India and the European Union (EU) made a huge announcement. After talking for 18 years, they finally agreed on a Free Trade Agreement (FTA). Leaders called it the "Mother of all deals" because it is very big. The main goal is to make it easier to buy and sell things between India and Europe by reducing/removing tariffs (customs duty).

About EU

The European Union (EU) is a group of 27 European countries that work together on trade, economy, laws, and policies. It was formed to promote peace, cooperation, and economic growth after World War II.

- It started with six founding members (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands) and has grown significantly to 28 members. Britain left the EU in 2020. Now 27 countries are members of the EU.

- The European Union (EU) has no single official capital, but Brussels (Belgium) serves as the de facto capital and main administrative hub, housing major institutions like the European Commission and European Council. The official currency of the EU is the euro (€, EUR), used by 20 of the 27 member states.

Key Facts (The Basics)

- India and the European Union (EU) on January 27, 202G, announced the conclusion and finalisation of negotiations for a free trade agreement.

- The announcement took place at the 16th India-EU Summit in New Delhi with PM Shri Narendra Modi, European Commission President Ms. Ursula von der Leyen, and European Council President Mr. António Costa present.

- The talks were concluded after 18 years. The negotiations started in 2007.

- The deal was described by leaders on both sides as the “mother of all deals” because of its scale and importance.

- The deal will help both sides grow their economies and depend less on a single country like China.

- The agreement is expected to be signed later this year and may come into force from early next year.

- The deal comes amid global trade tensions, including higher US tariffs.

What does the EU offer to India under FTA

- Marine Sector: Earlier, the European Union imposed import duties of up to 2G% on Indian marine products such as shrimp, fish, and other seafood. This reduced the competitiveness of Indian exports in Europe. Now, under the India–EU Free Trade Agreement, the EU has agreed to reduce these tariffs to 0%. This will make Indian seafood cheaper in European markets and is expected to benefit fishermen, exporters, and coastal employment in India.

- Textiles and Apparel: Earlier, Indian textiles and garments faced EU tariffs of up to 12%, making them costlier compared to products from other countries. Under the FTA, the EU has agreed to remove these duties completely (0%). This will significantly boost India’s textile and apparel exports.

- Leather and Footwear: Previously, Indian leather goods and footwear faced EU duties of up to 17%, limiting their market share. Now, the EU will eliminate these tariffs, allowing Indian leather products and shoes to enter Europe duty-free. This is expected to support small manufacturers and increase exports.

- Gems and Jewellery: Earlier, Indian gems and jewellery exports were taxed at up to 4% in the EU. Under the agreement, the EU has agreed to reduce these tariffs to zero. This will strengthen India’s position as a global jewellery hub and increase export earnings.

- Chemicals: Earlier, Indian chemical exports to the EU faced duties of up to 12.8%. Now, the EU has agreed to remove most tariffs, improving market access for Indian chemical manufacturers and exporters.

- Plastics and Rubber Goods: Earlier, Indian plastic and rubber products faced EU tariffs of up to 6.5%. Under the FTA, these duties will be reduced to zero, making Indian products more competitive in European markets.

- Base Metals and Engineering Goods: Previously, Indian base metals and engineering products were taxed at up to 10% in the EU. Now, the EU will eliminate these tariffs, helping Indian manufacturing and engineering exports grow.

- Railway Parts, Ships, and Aircraft Components: Earlier, Indian exports in this category faced tariffs of up to 7.7%. Now, the EU will allow duty-free access, helping India integrate better into global supply chains.

- Furniture and Light Consumer Goods: Earlier, Indian furniture and consumer goods faced EU duties upto 10.5%. Under the FTA, the EU has agreed to remove these duties, encouraging exports from India’s MSME sector.

- Toys and Sports Goods: Earlier, the Indian toys and sports goods sector was facing tariff upto 4.7%, but under FTA, the EU has agreed to remove these tariffs.

When one country sells to another, they usually pay a customs duty tax called "tariff.” This deal will cut or remove tariffs on most goods traded between India and the EU (about 9G–99%). This means import taxes on products will fall, making many items cheaper over time.

What does India offer to the EU under FTA?

The following are the sectors under which India is offering tax reduction to the imports from the EU:

- Motor Vehicles: Earlier, India imposed very high import duties of up to 110% on cars imported from the European Union, like BMW, Mercedes, Lamborghini, etc., to protect its domestic automobile industry. This made European cars extremely expensive and limited their sales in India. Now, under the India–EU Free Trade Agreement, India has reduced the duty to 10% for a quota of 25,000 cars per year, while premium cars will be taxed at 20% and mid-range cars at 30%. This will make European cars more affordable and increase competition in the Indian market.

- Wine and Spirits: Previously, India charged very high duties on alcohol imports, with wine taxed at about 150% and spirits upto 150%. These high duties restricted EU alcohol exports to India. Under the FTA, India has agreed to reduce wine duties to 20% for premium and 30% to medium and spirits to 40%, allowing greater market access to European producers and more choices for Indian consumers.

- Beer: Earlier, beer imported from the EU faced import duties of up to 110%, making it costly in India. Now, India has agreed to reduce the import duty on beer to 50%, which will significantly lower prices and increase imports from Europe.

- Olive Oil: Earlier, olive oil imports from the EU were subject to a 45% import duty, limiting their use despite growing demand. Under the new deal, India has reduced the duty to 0%, making olive oil more affordable for Indian consumers.

- Machinery and Electrical Equipment: Previously, machinery and electrical equipment from the EU attracted import duties of up to 44%, increasing costs for Indian industries that rely on advanced technology. Now, under the FTA, India has reduced duties to 0% for most machinery and electrical products, helping Indian manufacturers access high-quality European technology at lower prices.

- Aircraft and Spacecraft: Previously, aircraft and spacecraft parts from the EU faced import duties of up to 11%, increasing costs for India’s aviation sector. Under the FTA, India has eliminated duties and made it 0% on most aircraft and spacecraft items, supporting the growth of civil aviation and aerospace industries.

- Iron and Steel: Earlier, imports of iron and steel from the EU were taxed at up to 22%, protecting Indian producers but raising input costs for industries. Now, India has agreed to reduce duties to 0% for most iron and steel products, which will help sectors like construction and manufacturing.

- Pharmaceuticals: Earlier, pharmaceuticals imported from the EU faced varied import duties of 11%, making some medicines expensive. Now, under the agreement, most pharmaceutical products will attract 0% duty on most items, improving access to high-quality medicines and boosting cooperation in healthcare.

- Processed Food: Earlier, processed food items such as bread, biscuits, pasta, chocolates, and pet food were taxed at up to 50%, restricting EU exports. Under the FTA, India has agreed to reduce import duties to 0% for most processed food items, increasing product variety and competition in the Indian food market.

- Kiwis and Pears (Fresh Fruits): Earlier, India imposed high import duties and strict regulations on fresh fruits like kiwis and pears coming from the European Union to protect Indian farmers and domestic fruit production. These duties made EU fruits expensive and limited their availability in the Indian market. Now, under the India–EU Free Trade Agreement, India has agreed to reduce import duties on selected fruits such as kiwis and pears, mainly under tariff quotas from 33% to 10%.

The "New Rules" (Challenges): Even though taxes are gone, there are two strict rules Indian sellers must follow to sell in Europe:

- Carbon Tax: If Indian companies make steel or cement using "dirty" energy (like coal), they have to pay a fine.

- Forest Rule: Europe will not buy coffee, wood, or rubber if it comes from land where forests were cut down. Indian sellers have to prove their products are "forest-friendly."

When will FTA come into effect?

Although the agreement was approved in principle in January 202G, it cannot start immediately. The deal must first pass through detailed legal checks and be officially approved (ratified) by the parliaments of India and the European Union member countries. Because of this necessary paperwork, the FTA is expected to come into force (start working) by early 2027.

Why Is This Deal Important?

This agreement is vital because it is expected to massively boost India’s exports, which directly leads to more jobs and faster economic growth. It strengthens the political and economic bond between India and the EU, helping both sides reduce their dependence on other unpredictable single markets.

Our government has assured the Indian manufacturers, farmers, and dairy products producers, etc., that with the reduction of customs duty on imports of goods from EU countries, their interests will not be hampered. They will have a more conducive environment, and our government is committed to protect their interest with top priority.