Processed foods such as bread, pastries, biscuits, pasta, chocolate and pet food from the EU will become cheaper with the abolition of tariffs, now up to 50%. Both sides expect the deal to double trade between India and the 27-member bloc from $136 billion in six years.
The pact is seen as a victory for both India and Europe as they seek to overcome economic uncertainty caused by trade instability stemming from US President Donald Trump’s unpredictable tariff policies.
“India has completed its largest and most historically significant free trade agreement,” Prime Minister Narendra Modi said at a joint press conference with European Commission President Ursula von der Leyen and European Council President Antonio Costa.
“This … will make it easier for our farmers and small businesses to access European markets.” The deal represents 25% of global GDP and one-third of global trade, the prime minister said.
“We closed the mother of all deals,” von der Leyen said. It will affect the lives of about two billion people in India and the EU, about a quarter of the world’s population, she said earlier. The deal is likely to be done by December The deal comes at a time when India faces 50% US tariffs and the European Union faces the threat of sanctions from Trump even after concluding a trade deal. Duty on textiles, leather, marine products, furniture, base metals, toys, sporting goods, gems and jewelery will be removed on the first day of implementation of the India-EU Free Trade Agreement (FTA). For other items, it will drop to zero in phases of three, five and seven years. The EU currently imposes a tariff of up to 26% on some of these key imports.
The deal is expected to give India a competitive advantage in exports of labor-intensive goods that have been hit hard by US tariffs.
The EU, which becomes India’s 22nd FTA partner, also offered binding commitments on student mobility and post-study visas, along with concessions in 144 service sectors.
India kept the politically sensitive agriculture and dairy sectors out of the deal.
Under the deal, up to 250,000 European-made vehicles will be allowed into the country over time at preferential tariff rates, with tariffs dropping from 110% to as low as 10%. After five to 10 years, levies on auto parts will also be abolished. Specific timetables will be published later.
New Delhi also agreed to cut tariffs on European wines to 20% and spirits to 40%, from up to 150%. For beer, they will drop to 50%, from 110%.
High hopes
“It’s a great deal,” Commerce and Industry Minister Piyush Goyal told a news conference. “It will be taken up for legal clearance quickly … We hope that we should be able to celebrate the entry into force of this agreement in the 2026 calendar itself.”
Bilateral trade in goods is approximately US$136 billion and is expected to exceed US$200 billion within three to four years of the pact’s implementation. Similarly, trade in services, estimated at $80-85 billion, could reach $125 billion.
“When it enters into force, the FTA will be credit-positive, with lower tariffs and better market access supporting India’s ambitions to develop its manufacturing sector, attract foreign investment and strengthen the export competitiveness of its labor-intensive goods. Lower tariffs on EU imports may also help reduce costs, although such imports remain a smaller share of India’s overall import bills,” Moody’s Ratings said.
The agency added that broader benefits will depend on progress in complementary areas such as improving business friendliness and streaming regulation.
The deal is crucial because the bloc imports nearly $6.5 trillion worth of goods and nearly $3 trillion worth of services. India’s total exports are currently only about 1.5% of goods imported by Europe and barely 2.5% of services.
“This free trade agreement will boost confidence in India for every business and every investor in the world,” Modi said. “India is working hard on global partnerships in all sectors.”
Industry officials welcomed the deal. “The India-EU FTA is a significant milestone as it provides another wave of economic momentum for India and builds on the solid foundations laid by a series of policy reforms,” said Anish Shah, CEO and Managing Director, Mahindra Group.
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