India–EU Free Trade Pact: Opening Duty-Free Access for Indian Exports, Expanding Strategic Ties

Prime Minister Shri Narendra Modi and European Commission President Ursula von der Leyen on Tuesday jointly announced the conclusion of the India–European Union Free Trade Agreement (India–EU FTA), a landmark pact that grants duty-free market access to over 99 per cent of Indian exports by value and significantly boosts trade in goods and services. The agreement is expected to be ratified by Parliament soon.

The announcement was made at the 16th India–EU Summit during the visit of European leaders to India and marks a historic milestone in India–EU economic relations. It represents one of the most consequential trade agreements concluded by India to date.

The FTA follows intensive negotiations re-launched in 2022 after earlier exploratory engagements and reflects years of sustained dialogue, cooperation, and political commitment on both sides. It underscores a shared vision to establish a balanced, modern, and rules-based economic partnership between two major global economies.

Alongside the FTA, the leaders welcomed the signing of the India–EU Security and Defence Partnership, the first overarching framework of its kind between the two sides. The partnership will deepen cooperation in areas including maritime security, defence industry and technology, cyber and hybrid threats, space, and counter-terrorism. They also welcomed the launch of negotiations on a Security of Information Agreement to facilitate the exchange of classified information and strengthen security cooperation.

India and the European Union are the world’s fourth- and second-largest economies respectively, together accounting for nearly 25 per cent of global GDP and around one-third of global trade. The integration of these large, diverse, and complementary economies is expected to unlock unprecedented trade and investment opportunities.

Expanding Trade Ties

The European Union is among India’s largest trading partners. Bilateral trade in goods and services has grown steadily over the years. In 2024–25, India’s bilateral trade in goods with the EU stood at Rs 11.5 lakh crore ($136.54 billion), with exports valued at Rs6.4 lakh crore ($75.85 billion) and imports amounting to Rs 5.1 lakh crore ($60.68 billion). India–EU trade in services reached Rs 7.2 lakh crore ($ 83.10 billion) in 2024.

The FTA is expected to significantly scale up this trade relationship, enhance export competitiveness, and integrate Indian businesses more deeply into European and global value chains.

Beyond goods, the FTA unlocks high-value commitments in services, complemented by a comprehensive mobility framework enabling the seamless movement of skilled Indian professionals. With a young and dynamic workforce and one of the fastest-growing major economies, India is well positioned to leverage the agreement to create jobs, spur innovation, unlock sectoral opportunities, and enhance global competitiveness.

Broad and Modern Trade Coverage

The India–EU trade pact covers conventional areas such as trade in goods and services, trade remedies, rules of origin, customs, and trade facilitation. It also addresses emerging areas including digital trade, small and medium enterprises (SMEs), and other future-oriented sectors.

A decisive boost is expected for India’s labour-intensive sectors, including textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods, and automobiles. Tariffs of up to 10 per cent on nearly USD 33 billion worth of exports will be reduced to zero upon the agreement’s entry into force. This is expected to enhance competitiveness, empower workers, artisans, women, youth, and MSMEs, and strengthen India’s role in global value chains.

Automobiles and Manufacturing

In the automobile sector, the FTA introduces a calibrated and carefully crafted quota-based liberalisation package. This will allow European automobile manufacturers to introduce models in higher price bands in the Indian market, while also opening future possibilities for manufacturing under the ‘Make in India’ initiative and exports from India.

Indian consumers are expected to benefit from access to high-technology products and greater competition. Reciprocal market access in the EU will also create new opportunities for India-made automobiles in European markets.

Agriculture and Processed Foods

India’s agricultural and processed food sectors are poised for a transformative boost under the agreement. Key commodities such as tea, coffee, spices, fresh fruits and vegetables, and processed foods will gain enhanced competitiveness in EU markets, strengthening rural livelihoods and promoting inclusive growth.

At the same time, India has safeguarded sensitive sectors, including dairy, cereals, poultry, soymeal, and certain fruits and vegetables, ensuring a balance between export growth and domestic priorities.

Addressing Non-Tariff Barriers

Beyond tariff liberalisation, the FTA includes robust provisions to address non-tariff barriers. These include strengthened regulatory cooperation, enhanced transparency, streamlined customs procedures, and improved Sanitary and Phytosanitary (SPS) measures, along with disciplines on Technical Barriers to Trade.

Under Carbon Border Adjustment Mechanism (CBAM) provisions, India has secured forward-looking commitments, including most-favoured nation assurances extending flexibilities granted to third countries, enhanced technical cooperation on carbon pricing, recognition of verifiers, and financial assistance and targeted support to reduce greenhouse gas emissions and meet emerging carbon requirements.

Intellectual Property and Technology Cooperation

The FTA reinforces intellectual property protections in line with TRIPS, covering copyright, trademarks, designs, trade secrets, plant varieties, and enforcement of IPRs. It affirms the Doha Declaration and recognises the importance of digital libraries, including India’s Traditional Knowledge Digital Library (TKDL).

The agreement is also expected to facilitate cooperation in critical areas such as artificial intelligence, clean technologies, and semiconductors, supporting India’s technological advancement and future-ready growth.

Commitment to Multilateralism and Global Governance Reform

The leaders reaffirmed the importance of an effective multilateral system with the United Nations at its core. They underlined the need for comprehensive reform of the UN Security Council to make it more representative, inclusive, transparent, efficient, democratic, accountable, and reflective of contemporary geopolitical realities.

They also stressed the central role of the World Trade Organization (WTO) in the multilateral trading system and global trade governance, calling for meaningful, necessary, and comprehensive reform of the WTO so that it is better equipped to advance the objectives of all members.

Counter-Terrorism Cooperation

The two sides unequivocally and strongly condemned terrorism and violent extremism in all its forms and manifestations, including cross-border terrorism. They called for decisive and concerted international efforts to combat terrorism in a comprehensive and sustained manner in accordance with international law.

They agreed to enhance cooperation to counter radicalisation and violent extremism, combat terrorist financing, promote internationally agreed anti-money laundering standards, prevent the misuse of new and emerging technologies for terrorist purposes, and address terrorist recruitment. The leaders condemned in the strongest terms the terrorist attack in Pahalgam, Jammu and Kashmir on 22 April 2025, and the terror incident near Red Fort, New Delhi on 10 November 2025.

Positions on Global Conflicts

On Ukraine, both sides expressed concern over the ongoing war, noting the immense human suffering and global consequences. They reaffirmed their support for efforts to achieve a comprehensive, just, and lasting peace through dialogue and diplomacy, based on the principles of the UN Charter and international law, including respect for independence, sovereignty, and territorial integrity.

Regarding Gaza, the leaders noted the adoption of UN Security Council Resolution 2803 of 17 November 2025, which welcomes the establishment of the Board of Peace and authorises an International Stabilisation Force as outlined in the Comprehensive Plan. They encouraged all parties to implement the resolution in its entirety, stressed the need for unhindered humanitarian access, and reiterated their readiness to support efforts towards a just and durable peace. Both sides reaffirmed the importance of a negotiated two-State solution through dialogue and diplomacy.

The leaders also discussed recent developments of concern in Iran and the wider region, emphasising the importance of dialogue and peaceful diplomatic solutions.

Regional and Global Security Cooperation

Recognising that the security and prosperity of Europe and the Indo-Pacific are interconnected, the leaders underscored the importance of close cooperation on regional and global security matters. They reiterated their shared commitment to promoting a free, open, peaceful, and prosperous Indo-Pacific, in accordance with international law, including the United Nations Convention on the Law of the Sea (UNCLOS).

The leaders welcomed closer engagement in the Indo-Pacific, including the inaugural edition of the forthcoming India–EU Consultations on the Indo-Pacific to be held in New Delhi. They also looked forward to joint activities under the Indo-Pacific Oceans Initiative (IPOI) and strengthened cooperation within the Indian Ocean Rim Association (IORA) under India’s chairship.

Climate Action, Clean Energy and Resilience

The leaders recognised the increasing frequency of extreme climate events and reaffirmed the importance of the Paris Agreement, successive Conference of the Parties outcomes, and their respective Nationally Determined Contributions. They committed to working together to limit global temperature rise to well below 2°C and pursue efforts towards 1.5°C, while upholding the principles of equity and common but differentiated responsibilities and respective capabilities.

They agreed to accelerate cooperation under the EU–India Clean Energy and Climate Partnership, welcomed the creation of the India–EU Task Force on Green Hydrogen, and announced an India–EU Wind Business Summit to be held in 2026. The signing of the India–EU Administrative Arrangement on Disaster Risk Management will strengthen coordination in disaster preparedness and response, complemented by closer EU engagement with the Coalition for Disaster Resilient Infrastructure (CDRI) and the International Solar Alliance (ISA).

Environmental cooperation will also be expanded across circular economy, biodiversity, water resilience, ocean governance, and fisheries, with both sides reaffirming their commitment to the full and effective implementation of the Kunming-Montreal Global Biodiversity Framework.

Services Trade and Market Access

Services, a dominant and fast-growing component of both economies, are expected to see significant expansion under the FTA. Certainty of market access, non-discriminatory treatment, a focus on digitally delivered services, and ease of mobility will provide a major boost to India’s services exports.

The agreement secures expanded and commercially significant commitments from the EU across key sectors of Indian strength, including IT and IT-enabled services, professional services, education, financial services, tourism, construction, and other business services.

India has obtained predictable access to 144 EU subsectors, including IT/ITeS, professional services, other business services, and education. In return, the EU gains access to 102 subsectors offered by India, enabling high-technology services and increased investment flows from Europe into India.

Mobility and Social Security Frameworks

The India–EU FTA establishes a facilitative and predictable framework for business mobility, covering short-term, temporary, and business travel in both directions. Both sides have provided commitments for intra-corporate transferees and business visitors, including entry and working rights for dependents and family members.

The EU has also offered commitments in 37 sectors for contractual service suppliers and 17 sectors for independent professionals, including areas of key interest to India such as professional services, computer and related services, research and development, and education.

Additionally, India has secured a framework to engage constructively on Social Security Agreements over a five-year horizon, along with provisions supporting student mobility and post-study work opportunities. Access has also been secured for practitioners of Indian traditional medicine to work under their home titles in EU member states where such practices are not regulated.