Prime Minister Narendra Modi on Tuesday described the India–European Union Free Trade Agreement (FTA) as a historic milestone and a blueprint for shared prosperity, stating that it will open a new chapter in bilateral relations spanning trade, security, investment, innovation, and people-to-people ties. The agreement, signed on January 27, 2026, represents India’s largest free trade deal to date, covering the entire 27-member European Union bloc.

Speaking on the occasion, PM Modi emphasised that the agreement goes far beyond conventional trade liberalisation. “Today, India has concluded the biggest Free Trade Agreement in its history. This is not just a trade agreement; it is a blueprint for shared prosperity,” the Prime Minister said. He added that the pact would boost investment flows, create new innovation partnerships, and strengthen global supply chains, positioning India and the EU as reliable economic partners in a rapidly changing world.

A New Era in India–EU Relations

The India–EU FTA is being viewed as a transformational step in bilateral relations, especially at a time when global trade is facing protectionist pressures, geopolitical tensions, and supply chain disruptions. By bringing together India and one of the world’s largest economic blocs, the agreement is expected to significantly enhance economic resilience and strategic cooperation.

The European Union, comprising 27 countries, represents a market of over 450 million consumers with high purchasing power. For India, preferential access to this market offers enormous opportunities for exporters, manufacturers, and service providers. At the same time, the EU gains deeper access to one of the world’s fastest-growing major economies, with strong long-term consumption and investment potential.

Boost to India’s Exports and Market Access

One of the most significant outcomes of the FTA is the expected boost to India’s exports to the EU. Under the agreement, tariffs and import duties on a wide range of goods are either reduced or eliminated, making Indian products more competitive in European markets.

Labour-intensive sectors such as textiles, garments, leather, footwear, pharmaceuticals, steel, petroleum products, and electrical machinery stand to benefit the most. Currently, Indian textile exports to the EU face tariffs in the range of 12–16 per cent, putting Indian exporters at a disadvantage compared to countries like Bangladesh and Vietnam, which already enjoy preferential access under EU trade agreements. With the FTA in place, Indian textile and apparel exporters are expected to see a sharp improvement in competitiveness.

In addition, sectors such as automobiles and auto components, electronics, engineering goods, organic chemicals, gems and jewellery, and pharmaceuticals are likely to witness increased export volumes as regulatory alignment and tariff reductions ease market entry.

Strategic Importance Amid Global Trade Disruptions

The agreement comes at a crucial time for the global economy. The imposition of high tariffs by the United States, including steep tariffs of up to 50 per cent on certain Indian goods, has disrupted traditional trade flows. Against this backdrop, the India–EU FTA is expected to help Indian exporters diversify their export destinations and reduce overdependence on any single market.

The FTA is also seen as a strategic move to reduce excessive reliance on China in global supply chains. By strengthening trade and investment ties between India and the EU, the agreement supports the creation of alternative, trusted supply chain networks that are resilient and transparent. Notably, the EU itself faces the threat of higher US tariffs, making closer economic engagement with India mutually beneficial.

Key Benefits for India and the European Union

Free trade agreements are designed to open markets, align regulatory frameworks, and promote cross-border investment. Under the India–EU FTA, both sides are expected to benefit from smoother customs procedures, improved standards cooperation, and enhanced ease of doing business.

For India, the agreement is likely to:

• Increase exports and manufacturing output

• Generate employment, particularly in labour-intensive sectors

• Encourage technology transfer and innovation

• Attract higher foreign direct investment (FDI)

For the EU, the FTA offers:

• Greater access to India’s expanding consumer market

• Opportunities in infrastructure, clean energy, digital services, and manufacturing

• Stronger partnerships in sustainability, green technologies, and innovation

Trade Profile: Exports and Imports

India’s major exports to the EU include petroleum products such as diesel and aviation turbine fuel, electronics including smartphones, textiles, machinery and computers, organic chemicals, iron and steel, gems and jewellery, pharmaceuticals, and auto components.

On the import side, India imports machinery, computers and turbojets, electronics and integrated circuits, aircraft, medical devices, scientific instruments, rough diamonds, organic chemicals, plastics, iron and steel, automobiles, and auto parts from the EU. The FTA is expected to rationalise duties across these categories, benefiting both producers and consumers.

Alcohol Trade and Consumer Goods

Alcoholic beverages represent another important segment of bilateral trade. In 2023–24, India’s exports of alcoholic beverages to the EU included wines worth USD 1.5 million and spirits such as blended whiskies, vodka, brandy, and liqueurs valued at USD 64.9 million.

Meanwhile, India imported wines worth USD 412.4 million and spirits including blended whiskies, brandy, gin, tequila, vodka, and liqueurs worth USD 22.3 million from the EU. Reduced tariffs under the FTA could reshape pricing, market access, and consumption patterns in both regions, benefiting producers and consumers alike.

Foreign Direct Investment and Business Presence

The European Union is already one of India’s largest sources of foreign direct investment. From April 2000 to September 2024, cumulative FDI inflows from the EU into India stood at USD 117.4 billion. Approximately 6,000 EU companies currently operate in India across sectors such as manufacturing, services, technology, energy, and infrastructure.

EU investments account for 16.6 per cent of India’s total cumulative FDI equity inflows, which amount to USD 708.6 billion. The new FTA is expected to further accelerate investment flows by offering greater certainty, improved market access, and stronger investor protections.

Part of India’s Broader Trade Strategy

The India–EU FTA is part of India’s broader push to integrate more deeply with the global economy through high-quality trade agreements. Since 2014, India has finalised or concluded trade pacts with Mauritius, Australia, the UAE, Oman, the UK, EFTA nations (Switzerland, Iceland, Liechtenstein, and Norway), and New Zealand.

With the EU agreement, India reinforces its position as a key global trading partner and signals its commitment to rules-based, open, and inclusive trade.

Conclusion

In conclusion, the India–EU Free Trade Agreement represents a landmark achievement in India’s economic diplomacy. By calling it a blueprint for shared prosperity, Prime Minister Narendra Modi underscored its far-reaching impact on trade, investment, supply chains, and strategic cooperation. As the agreement comes into force and its provisions are implemented, it is expected to unlock new growth opportunities for businesses, strengthen economic ties between India and Europe, and contribute to long-term global economic stability.

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