Historic India–EU Trade Pact Integrates a 2 Billion-Consumer Market

Key Takeaways 

• On January 27, 2026, India and the European Union (EU) announced a major Free Trade Agreement (FTA), during the 16th India-EU Summit held in New Delhi. Coming on the heels of the EU’s trade pact with MERCOSUR, and a series of Indian trade deals over the last four years, the EU-India deal is the latest sign of countries trying to diversify their trading partners to protect against the perceived risks posed by China and, increasingly, the United States. 

• With a bilateral trade relationship already valued at over USD 190 billion, both sides are expected to reap major benefits from the agreement, widely described as the “mother of all deals,” creating a market of two billion people and covering about 25% of global GDP. 

• The EU will liberalize tariffs on 99.5% of the value of its imports from India, encompassing 96.8% of its tariff lines, while India will liberalize tariffs on 97% of the value of imports from the EU over 7-10 years, covering 92.1% of its tariff lines. 

• The agreement is expected to come into force within a year, following EU parliament ratification and approval by the Indian cabinet. The EU parliament’s ratification could present possible legal challenges and political opposition from some parties, linked to human rights and climate concerns, though, at this time, it is not expected to derail the deal. 

• Despite the comprehensive scope of the agreement, which spans trade, services, and investment, sensitive agricultural sectors like dairy are exempt, while the contentious issues of geographical indications (GIs) and stronger investment protection for European firms have been left to parallel talks.  

• The specific outcomes of chapters on government procurement, intellectual property, labor, environment, and sustainability will only be clear once the legal texts are released, likely in five to six months. 

• India also continues to face structural impediments from the EU Carbon Border Adjustment Mechanism (CBAM). Plans for an EU–India cooperation platform on recognition of carbon prices and verifiers and EU funding of nearly USD 600 million for India’s green transition do not address exporters’ carbon-tax burden, leaving CBAM as a significant unresolved issue, potentially eroding some of the FTA’s tariff benefits.  

• The comprehensive agreement embeds the India-EU economic partnership in a more predictable, rules-based framework amid increasing fragmentation of the global economy and growing concerns about “great powers” weaponizing trade and economic integration.