EU and India agree landmark free trade agreement

The EU and India confirmed their landmark free trade agreement on 26 January, following the resumption of negotiations between the two in 2022. The trade negotiations were originally launched in 2007 but were suspended in 2013.

The deal sees major tariff reductions on many EU goods exported to India with the abolition of tariffs on car parts within a decade, while machinery, pharmaceuticals and chemicals will also see tariffs significantly cut. European consumers will enjoy lower prices on Indian products in key sectors such as textiles, leather, and marine products.

More than €180 billion worth of goods and services per year are traded between India and the EU, with the new agreement expected to double EU goods exports to India by 2032.

Although the text of the agreement has yet to be published, according to press releases, the agreement will allow EU companies to gain “privileged” access to India’s services market, including financial services and maritime transport. It will also provide for a high level of intellectual property protection and enforcement rights, aligning EU and Indian laws closer.

The agreement will also see agricultural and food products enjoy significantly reduced tariffs. Geographical indicators are being negotiated to provide protection for EU farming products in India by blocking imitations.

The negotiated draft agreements are expected to be published soon, before going through legal revisions and translations on the EU side. The European Commission will then put forward a proposal to the European Council for the signature and conclusion of the agreement. Once signed, the European Parliament must also give its consent to the agreement and there must also be a European Council decision on its conclusion before it may enter into force. 

Totis Kotsonis, a trade law expert at Pinsent Masons, said: “Whilst the text of the deal has yet to be published, according to the European Commission, the deal represents the most ambitious trade opening that India has ever granted to a trade partner, and will involve India granting the EU tariff reductions that none of India's other trading partners have received.”

“This suggests a breadth and depth that exceeds that of the UK and India's recent free trade agreement, which was laid before parliament on 21 January 2026. The EU's financial services sector would also appear to do very well out of the agreement, with the EU saying that the agreement provides for ‘the most ambitious commitments on financial services by India in any trade agreement’, going beyond what they have given to other partners.”

“Obviously, it would be necessary to consider the text of the agreement before reaching any firm conclusions on the extent to which this is truly as ambitious as the press releases by the two sides would suggest. At the same time, the enthusiasm with which the deal was greeted on both sides is certainly a good sign.”

On the question of environmental protections, ongoing issues have surrounded India’s unhappiness over the implementation of carbon border adjustment mechanism (CBAM) rules, said Kotsonis

“However, it’s clear that the EU could not have offered any exemptions specifically for Indian companies,” he added.

“That would have been problematic under international trade rules as well as EU law. Ultimately, it would appear that the current turmoil in international trade has convinced both sides that it was in their mutual interest to find a way forward and seal the deal.

“The EU has also gone as far as it could in providing assurances to India that its companies will not be disadvantaged vis-à-vis suppliers from other EU trading partners, making it clear that that to the extent that there is a relaxation of the CBAM rules this would apply equally to Indian companies.” 

In terms of steps to enhance environmental protection, the parties have agreed to launch a joint platform for climate action whilst, subject to certain conditions being met, the EU will provide €500 million over the next two years to help India’s efforts to reduce greenhouse gas emissions and support sustainable industrial transformation.