India signs free trade agreement with European Union — How deal will impact exports, key sectors

India-EU Trade Deal: India and the European Union (EU) are expected to announce the mega free-trade agreement (FTA) on Tuesday, marking a major breakthrough after nearly 20 years of talks. How deal will impact exports and key sectors?

Edited by: Joy Pillai

Updated: January 27, 2026, 2:07 PM IST

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India to sign free trade agreement with European Union today, sends message against tariffs — How deal will impact exports, key sectors

India-EU Trade Deal: India and the European Union have signed the historic mega free-trade agreement (FTA) at a high-level summit in New Delhi on Tuesday, marking a major development after nearly 20 years of talks. Prime Minister Narendra Modi hosted European Commission President Ursula von der Leyen at the summit, which is also finalising the defence partnership. European Council President Antonio Costa also attended the summit. These agreements are expected to support a wider India–EU strategy to deal with the continuously changing global politics caused by recent US trade policies.

India, EU Finalised Talks For Free Trade Agreement

On Monday, Commerce Secretary Rajesh Agrawal informed that discussions on the long-pending free trade agreement between India and EU was successfully concluded.

“Negotiations have been successfully concluded. The deal has been finalised,” Agrawal said.

He further state that the pact is forward-looking from India’s perspective and it would help integrate New Delhi more closely with European economy.

“A successful India makes the world more stable, prosperous and secure, and we all benefit,” Von der Leyen said on X.

Also Read: The Golden Ticket: Why the India-EU Trade Deal Matters More Than You Think

When Will The ‘Mother Of All Deals’ Come Into Force?

According to Agrawal, the crucial free trade agreement is expected to come into force early next year. Notably, the historic pact still require approval from the Union Cabinet in India and the European Parliament. This process could take several months.

Commerce and Industry Minister Piyush Goyal has termed it “the mother of all deals”, reflecting its strategic significance. Talks between India and EU for the agreement started in 2007, making it one of New Delhi’s longest-running trade talks.

India-EU Free Trade Agreement: Tariff Cuts To Boost Exports In Labour-Heavy Industries

The agreement is expected to bring duty-free or preferential access to Indian exports, specially labour-intensive sectors like – textiles, chemicals, gems and jewellery, electrical machinery, leather and footwear.

Currently, the average tariff imposed by the EU on Indian goods is about 3.8 percent, however, on duties on labour-intensive products its 10 percent. India’s average tariff on EU goods is 9.3 percent, which also includes duties on automobiles, plastics, chemicals and pharmaceuticals.

Under FTA agreement, India and EU are both expected to reduce import duties on 90 percent of traded goods. The pact also includes ease on services such as telecommunications, transport, accounting and auditing.

India-EU Free Trade Agreement: Sector-Wise Impact

• Textiles, clothing and leather goods: With the deal, Indian exporters are expected to benefit the most. EU import taxes (around 10%) is expected to reduce. This could create more jobs in the labour-intensive industries.
• Automobile sector: India may reduce import taxes on cars from 110 percent to 40 percent. This will make European car brands more affordable, boosting competition, partnerships, technology sharing.
• Medicines, industrial products and food processing: Indian generic medicines, engineering products and processed foods get easier access to the EU market.
• IT, finance, professional work: More European companies are expected to operate in India, boosting investment and exchange of skills and expertise.
• Agricultural products – wine, olive oil: EU products will face fewer barriers in India due to which local farmers may face challenges but Indian processed food exports could gain better access to Europe.