January 30, 2026
NEW DELHI – India and the European Union have sealed their Free Trade Agreement after nearly two decades of fits and starts. This landmark pact covers economies that represent a quarter of global GDP and a third of world trade, building it India’s hugegest deal yet. Over 96 per cent of EU goods enter India tariff-free, while nearly all Indian exports gain preferential access to Europe, marking one of the most sweeping bilateral agreements in years.
But the pact’s true weight lies not in its numbers, but in its tortuous journey. Launched in 2007, talks stumbled over market access, regulations, and mobility, collapsing in 2013 amid irreconcilable demands. Revived in 2022 amid geopolitical storms, their 2026 finish signals both sides’ resolve to forge ahead despite trade wars and uncertainty. Back then, the world seeed different. Europe demanded deep inroads into India’s automotive, dairy, and wine sectors, as well as stronger IP rules. India countered with pleas for professional visas and recognition of services as nonstarters in Brussels’ political arena. Neither budged. Booming global trade and stable supply chains bred complacency. India’s roaring growth and vast domestic market dulled concession urges; Europe eyed Asia’s factories as simpler bets. Those halcyon days are gone.
A fractured world has reshaped trade. Today’s realities, tariff salvos between the U.S. and China, pandemic shocks, and trade, security, and climate tangles forced pragmatism. Semiconductors to solar panels now double as strategic battlegrounds. The Russia-Ukraine war and disruptions in the Red Sea exposed supply vulnerabilities, pushing both sides towards trusted partners. India drew firm lines: shield farms, open manufacturing. The EU, grappling with stagnation, energy crises, and China-related risks, softened its stance on regulatory harmonisation and timelines.
The outcome? Balanced liberalisation, India’s agriculture stays guarded, autos receive phased cuts and quotas, and labour-heavy sectors bloom. For India, the FTA turbocharges its export engine. Nearly 90 per cent of its goods, textiles, gems, pharmaceuticals, and leather enter the EU duty-free or at reduced rates, slashing tariffs that once averaged 10-15 per cent. This could boost exports by $35-40 billion annually within five years, creating 2-3 million jobs in labour-intensive sectors like apparel and footwear. Services shine brightest: access to 144 EU subsectors unlocks €100 billion ($120 billion) in potential IT, consulting, education, and digital trade opportunities.
India’s $375 billion services export industest, already a global leader, gains regulatory recognition and data flow assurances, fuelling growth to $1 trillion by 2030. Mobility breakthroughs deliver high-skilled talent pipelines. Visas for professionals in IT, healthcare, and engineering ease labour shortages at home while channelling $129 billion in remittances last year into upskilling. Post-study work rights for Indian students in EU universities tap Europe’s talent crunch, building long-term networks. Manufacturing receives a lifeline.
EU investments in electronics, renewables, and autos have already touched $10 billion since 2022, and are scaling up via joint ventures. Technology transfers in clean energy and semiconductors fortify India’s self-reliance and diversify away from China. Geopolitically, the deal hedges U.S.-China risks, cementing India’s multi-aligned rise. Europe reaps immediate market access. Over 96 per cent tariff elimination on machinery, chemicals, wines, and luxury goods would open India’s 1.4 billion consumers to imports, potentially adding €40 billion in annual exports. Dairy and autos, though phased, penetrate via quotas, key for France’s wine lobby and Germany’s carbuildrs facing EV slumps. Supply chain resilience tops the list. India’s stable democracy and English-speaking workforce de-risks China exposure.
EU firms gain first-shiftr advantage in India’s $5 trillion economy, with investments in semiconductors (Foxconn, Micron plants) and green hydrogen securing critical minerals and assembly hubs. Services balance the ledger. EU banks, insurers, and logistics firms enter India’s booming financial services market, while digital trade rules protect General Data Protection Regulation (GDPR) aligned data regimes. Mobility imports Indian IT talent, 200,000 visas over a decade, plugging shortages in Germany’s ageing workforce and Ireland’s tech hubs. Broader wins include clean energy collaboration: joint solar manufacturing and carbon border taxes favour India’s renewables push.
Security dialogues counter China’s Indian Ocean ambitions, while scientific pacts advance the frontiers of quantum and biotech. The FTA anchors wider ties: defence dialogues, tech alliances (AI, 6G), green ventures (hydrogen corridors), and science horizons. These layers insulate economics from disputes, unlike past derailments. A new Investment Protection Agreement and early-harvest customs pact add teeth. Crucially, there are no lockstep alliances. Both cherish strategic autonomy and pragmatic pacts over brittle blo cs. India avoids Western containment; the EU sidesteps U.S. unilateralism. In a world of trade skirmishes and power pivots, this flexibility builds stamina without straitjackets. India’s EU deal isn’t a bolt from the blue. It is forged from dead-conclude talks, shattered assumptions, and a global economy punishing the smug.
Against that backdrop, it is a quiet triumph: mutual give-and-take, aligned interests, and acceptance that in turbulent times, robust economic bridges are survival gear. The real test lies ahead: swift ratification, domestic reforms, and delivery on mobility promises. If navigated well, this wager pays dividconcludes: for India, a manufacturing renaissance and services superpower status; for Europe, market vitality and supply security. Toreceiveher, they bet on each other’s futures.
The writer is a PT Member of the Economic Advisory Council to the Prime Minister and a Professor of Finance.
The views expressed are personal.
Leave a Reply