On January 27th 2026, the European Union and India concluded negotiations on what both sides describe as the most significant trade agreement they have ever reached. The deal creates a free‑trade zone covering around 2 billion people, at a time when international supply chains continue to face geopolitical pressure and global growth prospects remain fragile.
Despite India’s position as the world’s fourth‑largest economy and the EU’s 9th largest trading partner, European exports have long been constrained by high tariffs and administrative burdens. The new agreement aims to reverse this dynamic. Under its terms, over 90% of EU goods exports will see tariffs eliminated or reduced, with projected annual duty savings of approximately €4 billion and expectations that EU exports to India could double by 2032.
The agreement delivers substantial gains in industrial sectors where European manufacturers have struggled with restricted access. Tariff reductions will affect goods such as machinery, chemicals, pharmaceuticals, medical devices, and aviation equipment, with many duties falling from levels as high as 44%, 22%, or 11% to zero. Automotive tariffs historically among the most prohibitive will undergo a gradual reduction from 110% to 10%, subject to defined quotas.
Agricultural market access, long considered politically sensitive, is addressed through targeted reductions. Indian tariffs averaging 36% across agri‑food imports will be eased for a range of European products, including wines, spirits, processed foods, olive oil, and fruit. Sensitive EU sectors such as beef, poultry, rice, and sugar remain fully protected, while all imports must continue to comply with the EU’s stringent sanitary and phytosanitary framework.
Beyond tariff policy, the agreement establishes commitments on services, digital trade, intellectual property, and regulatory transparency. India is set to provide its most ambitious services‑market concessions to date, including in financial and maritime sectors. Provisions covering standards, conformity assessment, and customs cooperation aim to reduce delays and regulatory uncertainty, which have historically affected EU‑India trade flows.
Sustainability features prominently. Both parties commit to implementing the Paris Agreement, addressing climate change, strengthening labour‑rights protections, and supporting women’s economic participation. The EU has indicated it will mobilise €500 million in support of India’s decarbonisation and industrial transition efforts. These measures form part of a broader policy architecture intended to anchor the agreement within global environmental and social governance standards.
The agreement will now enter the EU’s internal legal and political process, including legal revision, translation, Council approval, and consent from the European Parliament. India must also complete its domestic ratification procedures. Only once both parties finalise these steps can the agreement enter into force.
While the deal has been welcomed as a stabilising development for two major economies, its long‑term impact will depend on implementation, geopolitical developments in the Indo‑Pacific region, and the ability of businesses on both sides to adapt to the new framework.
