EU and India Finalise Historic Free Trade Agreement, Creating One of the World’s Largest Trade Zones

In a landmark development for global trade, the European Union and India have concluded negotiations on an ambitious and commercially significant Free Trade Agreement (FTA), marking the largest such deal ever finalised by either side. The agreement strengthens economic and strategic ties between the world’s second- and fourth-largest economies at a time of growing geopolitical uncertainty and global economic pressures.

The FTA underscores a shared commitment by the EU and India to economic openness and a rules-based international trading system, creating a free trade zone encompassing nearly two billion people.

European Commission President Ursula von der Leyen described the agreement as historic, stating that it deepens cooperation between the world’s largest democracies and sends a strong signal that multilateral, rules-based cooperation continues to deliver tangible benefits.

Trade Expansion and Economic Impact

The EU and India currently trade goods and services worth more than €180 billion annually, supporting approximately 800,000 jobs across the European Union. The new agreement is expected to significantly accelerate this exchange, with EU goods exports to India projected to double by 2032.

Under the agreement, India will eliminate or reduce tariffs on 96.6% of EU goods exports, resulting in estimated annual savings of around €4 billion in duties for European exporters. This represents the most extensive market opening India has ever granted to a trade partner.

The deal provides EU companies with preferential access to India’s rapidly expanding market of 1.45 billion people, supported by an economy valued at approximately €3.4 trillion.

Major Gains for Industrial and Agri-Food Sectors

India has agreed to unprecedented tariff reductions for European products. Tariffs on cars will be progressively reduced from 110% to as low as 10%, while duties on car components will be fully eliminated over a five- to ten-year period. High tariffs on machinery, chemicals, and pharmaceuticals—currently reaching up to 44%, 22%, and 11% respectively—will also be largely phased out.

The agreement also significantly lowers barriers for EU agri-food exports, where Indian tariffs average over 36%. Duties on wines will be reduced from 150% to 75% upon entry into force and further lowered to around 20% over time. Tariffs on olive oil will fall from 45% to zero within five years, while tariffs on processed food products such as bread and confectionery will be eliminated.

Sensitive European agricultural sectors, including beef, poultry, rice, and sugar, remain excluded from tariff liberalisation. All Indian imports into the EU will continue to be subject to strict EU health and food safety standards.

Support for Small Businesses

A dedicated chapter in the agreement focuses on small and medium-sized enterprises (SMEs). Both sides will establish contact points to help SMEs navigate the agreement, access relevant information, and address operational challenges. SMEs are expected to benefit from reduced tariffs, streamlined regulations, and greater transparency and predictability in cross-border trade.

Services, Intellectual Property, and Sustainability

The FTA provides EU firms with enhanced access to India’s services markets, including financial services and maritime transport. India’s commitments in financial services go beyond those offered in any of its previous trade agreements.

Strong protections for intellectual property rights form a central pillar of the deal. The agreement enhances enforcement mechanisms for copyrights, trademarks, designs, trade secrets, and plant variety rights, aligning EU and Indian IP frameworks more closely and facilitating innovation-driven trade and investment.

The agreement also contains a comprehensive Trade and Sustainable Development chapter, addressing environmental protection, climate change, labour rights, and women’s empowerment. It establishes mechanisms for dialogue and cooperation on sustainability-related trade issues.

In parallel, the EU and India plan to sign a Memorandum of Understanding to establish an EU-India platform for climate cooperation, expected to launch in the first half of 2026. Subject to EU budgetary procedures, up to €500 million in EU support is envisaged over the next two years to assist India’s efforts in reducing greenhouse gas emissions and promoting sustainable industrial transformation.

Next Steps and Background

The negotiated draft texts will be published shortly and undergo legal review and translation into all official EU languages. The European Commission will then submit the agreement to the Council for approval and signature, followed by consent from the European Parliament. Once ratified by India, the agreement can enter into force.

Negotiations for the EU-India FTA were originally launched in 2007, suspended in 2013, and relaunched in 2022. The final negotiating round concluded in October 2025. Parallel negotiations on a Geographical Indications Agreement and an Investment Protection Agreement are ongoing.