The EU and India conclude a historic Free Trade Agreement that will affect 2 billion people and 25% of global GDP
After two decades of negotiations, the EU and India are set to sign a trade agreement that will benefit the European automotive, wine and dairy sectors, as well as the Asian giant's technology, textile, chemical and pharmaceutical sectors, with the exception of the agricultural sector
- Global market
- Benefiting sectors
- Strategic commitment
- Guests of honour
- Promotion of investment
- Security and defence
- Financial supervision
‘The mother of all agreements.’ That is how Ursula von der Leyen, President of the European Commission, described the Free Trade Agreement that the European Union and India are preparing to sign in a recent speech in Davos, at the conclusion of the 16th bilateral summit between the EU and the Asian giant.
Global market
The result of this trade alliance between the world's two largest democracies is a huge market with more than 2 billion consumers and a combined GDP representing 25% of global GDP.
India was already the European Union's main trading partner, with trade worth 180 billion euros in 2024, which will now increase with this new agreement, bringing to an end a long negotiation process that began in 2007 and resumed in 2021.
Benefiting sectors
The agreement aims to promote the exchange of goods and services by reducing tariffs in a number of sectors that are strategic for both markets. The European Union will see easier access for exports of cars, wine and dairy products to India, while India will benefit from competitive advantages in the export of electronic, textile, chemical and pharmaceutical products to the EU.
The agreement is expected to double annual EU exports to India by 2032, in particular by eliminating or reducing 96.6% of tariffs on EU products. This will save European exporters up to €4 billion per year in customs duties.
This treaty represents the most ambitious trade opening ever granted by India to a trading partner and will offer a significant competitive advantage to EU industries. Among the main tariff reductions or eliminations are:
- Aircraft and spacecraft: from 11% to 0% for almost all products within 10 years.
- Electrical machinery and equipment: from up to 44% to 0% within 10 years.
- Chemicals: from 22% to 0% within ten years.
- Motor vehicles: from 110% to 10% for a quota of 250,000 vehicles per year.
- Iron and steel: from 22% to 0% within ten years.
- Pharmaceutical products: from 11% to 0% within ten years.
- Wines: from 150% to 75% upon entry into force, with a gradual reduction to a minimum of 20%.
- Olive oil: from 45% to 0% within five years.
- Processed agri-food products: from up to 50% to 0%.
The only red line in the treaty is the agricultural sector, which has been expressly excluded from the negotiations due to strong political and economic sensitivities on the part of both European farmers and Indian producers.
Strategic commitment
In the words of Von der Leyen, ‘the European Union and India are showing a fractured world that another way is possible’, committing to a strategic partnership based on trade openness at a time when tariff wars between trading powers are proliferating.
Strategically, the European Union's commitment to concluding the Free Trade Agreement with India responds to a desire to diversify its trading partners and secure its supply chains in a global geopolitical and economic environment marked by trade tensions and tariff threats from the Trump administration.
Guests of honour
To mark the culmination of this agreement, which, according to European sources, is 83% complete (four of the 24 planned agreements remain to be finalised), the President of the European Commission and the President of the European Council, António Acosta, travelled to New Delhi.
There they were received as guests of honour by Indian Prime Minister Narendra Modi at the celebrations for the 77th Republic Day of India, which commemorates the entry into force of the Constitution, which was a step towards independence from the British Empire. In fact, units from the European armies took part in the commemorative parade for the first time.
As António Acosta pointed out, ‘our summit sends a clear message to the world. At a time when the world order is being profoundly reshaped, the European Union and India stand united as strategic and reliable partners’.
Promotion of investment
During their visit to India, the European leaders took part in the India-EU Business Forum, attended by executives and industry leaders from both sides, where they called for ambitious private sector investment to exploit synergies in critical sectors and for new business initiatives to foster closer trade and investment ties.
Security and defence
On the sidelines of the Free Trade Agreement negotiations, Von der Leyen and Acosta, together with Narendra Modi, welcomed the signing of the Security and Defence Agreement between the two sides, which is the first comprehensive defence and security framework of its kind and will increase cooperation in the areas of maritime security, defence industry and technology, cyber threats, space and counter-terrorism, among others.
Global security was also discussed at the 16th EU-India Bilateral Summit. The leaders took note of the adoption of United Nations Security Council Resolution 2803 of 17 November 2025 for peace in Gaza and encouraged all parties to implement it in full.
In this regard, EU and Indian leaders reiterated their willingness to support efforts to achieve a just and lasting peace and stressed the need for unhindered humanitarian access.
They also called for a just and lasting solution, based on the implementation of the two-state solution, through dialogue and diplomacy.
With regard to recent worrying developments in Iran and the region, Von der Leyen, Acosta and Modi stressed the importance of dialogue and diplomacy in resolving problems peacefully.
Financial supervision
The bilateral summit has also led to increased cooperation on financial supervision between the EU and India. The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has signed a Memorandum of Understanding with the Reserve Bank of India (RBI), its central bank, to facilitate cooperation and information exchange.
This agreement represents a significant step forward after years of sustained collaboration between the two entities and reflects ESMA's commitment to international supervisory cooperation and mutual support to promote secure, resilient and open financial markets.
ESMA is also in discussions with the Securities and Exchange Board of India (SEBI) and the International Financial Services Centres Authority (IFSCA) to conclude similar agreements.