The European Union and India have sealed a landmark free trade agreement (FTA), bringing two of the world’s largest economies closer together at a time when global trade is increasingly shaped by geopolitical tensions.

Covering nearly two billion people and almost a quarter of global economic output, the deal marks the biggest bilateral trade pact either side has ever signed.

“The EU and India make history today, deepening the partnership between the world’s biggest democracies. We have created a free trade zone of 2 billion people, with both sides set to gain economically,” said European Commission President Ursula von der Leyen. She added that “rules-based cooperation still delivers great outcomes”.

At the core of the agreement is a sweeping reduction in tariffs.

India will eliminate or reduce duties on 96.6% of EU goods exports, while the EU will liberalise 99.5% of its tariff lines on goods imported from India over seven years.

For European exporters, the Commission estimates savings of up to €4bn per year in customs duties — money that can be reinvested into production, wages, or lower consumer prices.

Trade Commissioner Maroš Šefčovič said the agreement shows that “win-win trade is real”, stressing that the immediate priority is to ensure firms “reap tangible benefits as quickly as possible”.

India’s average industrial tariffs exceed 16%, among the highest of any major economy.

Their reduction is therefore particularly significant for Europe’s capital-intensive industries, which have long faced steep barriers to the Indian market.

In 2024, EU exports to India totalled roughly €75bn, driven by €48.8bn in goods and a further €26bn in services.

Machinery and electrical equipment are by far the EU’s largest export category to India, worth €16.3bn in 2024. These products currently face tariffs of up to 44%, which will be mostly eliminated under the agreement over a period of five to ten years.

Aircraft and spacecraft exports totalled €6.4bn last year. Existing duties of up to 11% will be reduced to zero, with tariff elimination phased in over periods of up to ten years.

EU chemical exports to India, valued at €3.2bn in 2024, are currently subject to tariffs of up to 22%. Most of these duties will be scrapped at the entry into force of the agreement.

Pharmaceutical exports amounted to €1.1bn and currently face tariffs of around 11%. These will be fully eliminated over staging periods of five to seven years.

One of the most striking changes concerns motor vehicles. Indian tariffs will fall from 110% to as low as 10%, albeit subject to quotas, while car parts will eventually become tariff-free. For European manufacturers, this opens access to the world’s fastest-growing large automotive market.

The potential gains extend beyond exports. According to the European Union, EU trade with India already supports around 800,000 jobs across the bloc, with the agreement expected to reinforce employment in manufacturing, services, and supply chains as trade volumes expand.

Agriculture has long been the most sensitive area in EU–India negotiations. Currently, Indian tariffs on agri-food products average 36% and can reach 150%, effectively shutting out many European exports.

In 2024, EU agri-food exports to India were worth just €1.3bn, only 0.6% of the EU’s global agri-food trade, due in large part to prohibitive tariffs.

Amid the trade agreement, Europe’s high-value agri-food exports — from olive oil and wine to confectionery — are set to gain meaningful access to India’s rapidly expanding middle-class consumer market.

Related

Wine exports, which currently face tariffs of 150%, will see duties cut sharply to between 20% and 30%. Spirits, subject to tariffs of up to 150%, will benefit from a substantial reduction to a flat 40%, while beer tariffs will fall from 110% to 50% under the agreement.

Olive oil will see one of the most dramatic changes, with tariffs of up to 45% fully eliminated, opening the door for wider consumption beyond premium niches.

“Under this agreement European wines, spirits, beers, olive oil, confectionary, and other products will enjoy preferential access to the rapidly growing Indian market,” said Christophe Hansen, EU Commissioner for Agriculture and Food.

Crucially, sensitive agricultural sectors such as beef, chicken, rice, and sugar remain excluded from liberalisation, protecting European farmers.

“As in any trade agreement, our high food safety standards are fully maintained. The safety of EU consumers is non-negotiable,” Hansen added.

According to ITC Trademap.org data, the European Union imported a total of €89.8bn worth of goods from India in 2024.

The largest single import category was electrical machinery and equipment, including sound and television recording devices, with imports valued at €13.4bn.

This was followed by organic chemicals, which reached €11.9bn.

Imports of machinery and mechanical appliances, including nuclear reactors and boilers, totalled €8.6bn, while iron and steel shipments amounted to €6.2bn.

Pharmaceutical products accounted for €4.7bn in EU imports from India.

Textiles also remained significant, with imports of articles of apparel and clothing accessories reaching €3.6bn.

Beyond tariff cuts on goods, the EU–India FTA marks a substantial breakthrough in the liberalisation of services — a traditionally protected domain in India’s trade policy.

India’s services commitments under this FTA are the most ambitious it has ever undertaken, surpassing the concessions granted to partners such as the United Kingdom and Australia.

European companies will gain more predictable access to key sectors including financial services, maritime transport, and professional services, with clearer rules on licensing, local presence, senior management, and board requirements.

According to the European Commission, total EU services exports to India reached €26bn in 2024, a figure expected to grow substantially under the new legal and market access conditions introduced by the FTA.

For small and medium-sized enterprises (SMEs), the agreement is designed to address structural disadvantages that often prevent smaller firms from benefiting from trade deals.

A dedicated SME chapter aims to ensure that smaller firms can translate the agreement into real commercial opportunities.

Both sides will set up SME contact points and a shared digital platform providing clear, up-to-date information on tariffs, customs procedures, and market-entry requirements.

The FTA will now go through legal revision and translation into all official EU languages.

The European Commission will then submit it to the Council and European Parliament for approval. In parallel, India must ratify the deal domestically.

Once ratified by both sides, the agreement will enter into force, with tariff reductions and regulatory provisions gradually phased in over a period of up to ten years.

For Europe, the agreement is not only about exports but also about economic resilience.

With India’s economy growing at over 6% annually, and a young population of 1.45 billion, the agreement provides the EU with a strategic partner in a region increasingly seen as central to global economic power.

The Commission expects the deal to double EU goods exports to India by 2032, supporting jobs across manufacturing, agriculture, and services.

In an era of fragmented trade and rising protectionism, the EU–India FTA stands out as a long-term bet on openness — and on growth driven by deeper economic ties between two of the world’s largest democracies.