India and EU Conclude Landmark Trade Pact
After nearly two decades of intermittent negotiations, India and the European Union have concluded a long-awaited free trade agreement. Prime Minister Narendra Modi announced the breakthrough on Tuesday, calling it a significant step toward strengthening economic ties between the two sides.
The deal comes at a time when both India and the EU are seeking to reduce their exposure to an increasingly unpredictable global trade environment, particularly in relation to the United States.
Deal Likely to Be Implemented in 2026
Commerce Minister Piyush Goyal said the India–EU free trade agreement is likely to come into force in 2026. He described the deal as a “win-win” for both India and Europe, pointing to its balanced structure and long-term economic impact.
Echoing that view, Home Minister Amit Shah called the pact a “strategic breakthrough” in India’s global trade engagement, underscoring its significance beyond tariffs and market access.
India to Open Market Gradually
Under the agreement, India will gradually open its large and tightly regulated market to the 27-member European Union, its largest trading partner.
According to the EU, the deal will cut or eliminate tariffs on nearly 97 percent of European exports to India, a move expected to save European exporters up to €4 billion annually in duties.
Sharp Tariff Cuts on Cars and Wine
One of the most closely watched aspects of the deal is the planned reduction in tariffs on automobiles and alcoholic beverages.
According to reports, India will lower tariffs on cars in phases, cutting peak rates from 110 percent to as low as 10 percent. At the same time, it will progressively reduce duties on wine from 150 percent to around 20 percent.
Taken together, these changes mark a significant shift in India’s traditionally protectionist approach to sensitive consumer sectors.
Processed Food Gets Duty-Free Access
The agreement will fully eliminate tariffs on several processed food items. Duties of up to 50 percent on products such as pasta and chocolate will be scrapped entirely.
This move is expected to make European food products more affordable for Indian consumers while increasing competition in the domestic market.
What India Gains from the Deal
For India, the trade pact offers a boost to exports, particularly in labour-intensive sectors. Ajay Srivastava, a former Indian trade official, said the agreement could help offset the impact of higher US tariffs on Indian goods.
Lower tariffs will also provide Indian consumers with access to EU products at more competitive prices, especially in segments where duties were previously among the highest globally.
Strategic and Economic Implications
Beyond the trade numbers, the India–EU FTA carries significant strategic weight. It deepens economic integration with Europe at a time when global supply chains are being reconfigured, and geopolitical uncertainty remains elevated.
At the same time, the deal positions India as a more open and reliable trade partner, while giving European companies stronger access to one of the world’s fastest-growing major economies.
The Road Ahead
Although both sides have finalised the agreement, implementation will roll out in stages. Regulatory alignment, phased tariff reductions, and sector-specific safeguards will determine how quickly and effectively the benefits reach businesses and consumers.
If the pact takes effect as planned in 2026, the India–EU FTA could reshape bilateral trade relations and set a new benchmark for India’s future trade agreements.
PM Narendra Modi and EU chief Ursula von der Leyen
Photo: India Today
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