India and the EU sealed a landmark FTA after 18 years, with PM Modi calling it historic and EU leaders hailing it as a boost to trade and strategic ties.
The pact cuts duties on European cars, wine, medicines and high-tech goods while opening wider access for Indian exports to the 27-nation EU market.
As India’s largest goods-trading partner, the EU is set for deeper trade, investment and mobility ties under the pact, to be formally signed later this year.
On January 27, 2026, Prime Minister Narendra Modi called the pact “historic” and said that the India–EU FTA marks a significant milestone in bilateral relations, thanking European leaders for making it possible. With this, the Free Trade Agreement between India and the European Union has been sealed after an 18-year wait.
The trade pact, which European Commission President Ursula von der Leyen described as “the mother of all trade deals,” was announced during a media briefing in Delhi. She said the agreement would open European markets for Indian goods while making several imported European items cheaper in India by reducing duties.
The formal signing of the agreement is expected later this year after approval by the European Parliament and EU member states. Alongside the trade pact, India and the EU are advancing talks on security, defence cooperation and climate action.
The European Union is India’s largest partner in goods trade, with bilateral commerce touching $136 billion in 2024–25. It also ranks among India’s leading partners in overall trade, covering both goods and services. From 2019 to 2024, India–EU services trade recorded steady growth, with Indian exports increasing from €19 billion to €37 billion, while EU exports to India rose to €29 billion.
European cars such as Mercedes, BMW and Audi currently attract import duties of over 100 per cent in India. Under the India–EU trade agreement, cars priced above €15,000 (around ₹16 lakh) will face a reduced duty of 40 per cent, which will eventually be lowered further to 10 per cent within an annual quota of 250,000 vehicles. This is expected to cut prices by several lakhs. To protect India’s fast-growing small-car segment—dominated by vehicles priced between ₹10 lakh and ₹25 lakh—the EU will not export cars in this category, though manufacturing in India will be permitted. Indian officials noted that while demand below ₹25 lakh is strong domestically, EU manufacturers are more interested in the premium segment above this range.
Wine and spirits from Europe, including those from France, Italy and Spain, will also become cheaper. India’s current 150 per cent import duty on wine will be gradually reduced to 20 per cent over five to ten years. However, wines priced below €2.5 will not receive duty concessions to protect domestic producers. The agreement will also lower prices of cognac, premium gins and vodkas, while Indian wines will gain duty concessions in EU markets.
The deal is expected to make medicines and medical equipment imported from Europe more affordable, particularly treatments for cancer and other critical illnesses. At the same time, Indian-manufactured medicines will gain access to all 27 EU markets. Tariffs on aircraft spare parts, mobile phones and high-tech electronic items imported from Europe will be eliminated, reducing manufacturing costs in India and potentially lowering consumer prices.
In addition, proposed zero tariffs on iron, steel and chemical products could reduce raw material costs for construction and industry. Indian exports of garments, leather goods and jewellery are also set to benefit from improved access to European markets.
The agreement enables free trade of goods between the EU’s 27 member states and India, together accounting for nearly 25 per cent of global GDP and a combined market of two billion people.
India and the EU have also agreed on a mobility framework easing short-term movement of professionals and students. The deal comes as both sides face economic and geopolitical pressure from the United States.
“This is India’s biggest free trade agreement,” PM Modi said. “It will make access to European markets easier for India’s farmers and small businesses. It will boost manufacturing and services sectors and innovative partnerships.”
European Commission President Von der Leyen said, “This is the tale of two giants — the world’s second and fourth largest economies — choosing partnership in a true win-win fashion.”
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