The India–EU FTA: Building A New Trade Architecture

India and the European Union signed one of the most consequential trade agreements in recent history — a comprehensive Free Trade Agreement (FTA) that could reshape economic engagement between two of the world’s largest markets. Often referred to as the “mother of all deals,” the India-EU FTA comes at a time when global trade is increasingly fragmented by geopolitical tensions, protectionism and supply chain disruptions. For both India and the EU, the agreement represents a strategic pivot toward diversification, resilience and long-term partnership.

In an era of uncertainty, the India-EU FTA sends a powerful signal — that open, rules-based trade partnerships still matter. For India, it accelerates integration with advanced economies and strengthens its position in global value chains. For the EU, it unlocks access to one of the world’s most dynamic markets. More than just a trade pact, the agreement represents a strategic alliance aimed at shaping a resilient, sustainable and multipolar global economic order.

The India-EU Free Trade Agreement is expected to provide a significant boost to global growth at a time of slowing trade and economic uncertainty. By connecting two major economic blocs that together account for nearly a quarter of global GDP, the pact will increase trade flows, lower costs and stimulate cross-border investment. Stronger integration across sectors such as manufacturing, clean energy, pharmaceuticals and technology will help diversify and stabilize global supply chains, reducing overreliance on single markets. For India, the agreement opens the door to deeper access to one of the world’s most affluent consumer markets. Lower tariffs and regulatory cooperation will make Indian goods more competitive across Europe, particularly in manufacturing, apparel, engineering goods and digital services. The FTA is estimated to boost India’s exports to the EU by over USD 50 billion by 2031. The EU, in turn, gains a stronger foothold in one of the fastest-growing major economies in the world.

One of the most debated areas has been automobiles. India currently imposes steep import duties, often exceeding 100%, on foreign cars. Under the FTA, these tariffs are expected to be gradually reduced — in some cases to as low as 10% — making European vehicles, especially luxury and electric models, significantly more affordable in India without harming local industry, which focuses on the low and middle-end ranges of these products. Similarly, high duties on European wines from the current 150 percent, will be brought down to 30 and 20 percent for premium and medium categories respectively. Moreover, agriculture and dairy, and EVs for 5 years, have been excluded from the deal. Further, tariffs on processed foods such as pasta and chocolate will be eliminated, offering European producers expanded opportunities in India’s rapidly growing consumer market.

Beyond goods, the agreement includes ambitious commitments in services — an area where India holds strong competitive advantages. EU companies will gain enhanced access to India’s financial and maritime services markets, while Indian professionals and service providers are likely to find new opportunities across Europe. Notably, this is the

most extensive set of financial services commitments India has offered in any trade agreement so far. The EU has opened nearly 144 sub-sectors out of 155, while India has liberalized 102 sub-sectors, with bound commitments in IT and ITeS where India’s comparative advantage through English-proficient, technically skilled labour is well established. The agreement also facilitates better mobility of students and provides post-study visa opportunities, effectively deepening India’s human capital advantage by exposing Indian professionals to European markets and technologies.

Trade between India and EU is projected to reach USD 213.19 bn by 2028. This could be even higher, if the benefits of the India-EU FTA were to kick in early. Post conclusion, signing and ratification of the deal could take more than a year, possibly longer, if there are domestic complications, as seen with EU’s recent trade agreement with Mercosur, which was opposed by EU lawmakers. This delay is a concern for industry.

Alongside the FTA, both sides are expected to strengthen cooperation in defence and security, critical technologies, climate action and supply chain resilience. Overall, the agreement amplifies India’s competitive advantage in the EU market, strengthening its position vis-à-vis key global competitors.

The deal signifies not just acute political will, but more importantly a recognition of the extant geopolitical and geoeconomic realities facing both sides. As implementation begins and complementary agreements on investment protection and geographical indications follow, the India-EU partnership is poised to enter a new phase — one defined by opportunity, trust and shared prosperity.