India and the European Union finalized on Tuesday a long-awaited trade agreement to cut tariffs on the majority of goods, seeking to strengthen bilateral trade and lessen dependence on the United States as global trade frictions intensify.
According to the EU, the pact will remove or lower tariffs on 96.6 percent of goods traded by value, a move expected to double EU exports to India by 2032 and deliver duty savings of around $4.75 billion for European firms.
India’s largest free trade agreement in history
The European Union will eliminate or reduce tariffs on 99.5 percent of imports from India over a seven-year period, with duties set to fall to zero on products including marine goods, leather and textiles, chemicals, rubber, base metals, and gems and jewellery, India’s trade ministry said.
Both sides added that agricultural products such as soya, beef, sugar, rice and dairy were excluded from the scope of the agreement.
“The historic agreement with the EU, which is India’s largest Free Trade Agreement in history, has substantial benefits for the 1.4 billion people of India. It will: Make access to European markets easier for our farmers and small industries, create new opportunities in manufacturing and further strengthen cooperation between our services sectors,” said Indian Prime Minister Narendra Modi.
“This landmark deal between the 2nd largest and 4th largest economies of the world promises to create unprecedented opportunities and open new avenues of growth as well as cooperation. This deal will benefit the entire global community. It would help create quality jobs in key sectors, enable further mobility for our youth, professional talent, students and researchers and unlock the potential of the digital age. Importantly, it will foster innovation and strengthen economic ties for mutual growth. Together, India and the EU are moving ahead with trust and ambition towards a prosperous and sustainable future,” he added.
India-EU trade hits $136.5 billion
The EU-India trade negotiations, which have dragged on for nearly two decades, gathered pace after Washington imposed 50 percent tariffs on certain Indian goods, while U.S. allies pushed back against President Donald Trump’s tariff threats and his bid to take over Greenland.
Ahead of the agreement with New Delhi, the EU sealed a deal with the South American bloc Mercosur, following pacts last year with Indonesia, Mexico and Switzerland. Over the same period, India concluded trade agreements with Britain, New Zealand and Oman.
Trade between India and the EU reached $136.5 billion in the fiscal year ending March 2025, surpassing India’s trade with the United States at $132 billion and with China at $128 billion.
“The EU and India make history today, deepening the partnership between the world’s biggest democracies. We have created a free trade zone of 2 billion people, with both sides set to gain economically. We have sent a signal to the world that rules-based cooperation still delivers great outcomes. And, best of all, this is only the start – we will build on this success, and grow our relationship to be even stronger,” said European Commission President, Ursula von der Leyen.
Deal slashes tariffs on cars, machinery and pharmaceuticals
Under the agreement, India will grant the EU tariff reductions that none of its other trading partners have received. For example, tariffs on cars are gradually going down from 110 percent to as low as 10 percent, while they will be fully abolished for car parts after five to ten years. Tariffs ranging up to 44 percent on machinery, 22 percent on chemicals and 11 percent on pharmaceuticals will also be mostly eliminated.
A dedicated chapter will also help small EU businesses take full advantage of the new export opportunities. For instance, both sides will put in place dedicated contact points to provide SMEs with relevant information on the FTA and help them with any specific issues they would face when trying to use the FTA’s provisions. In addition to this, SMEs will particularly benefit from the tariff reductions, removal of regulatory barriers, transparency, stability and predictability provided by the Agreement.
The agreement also removes or reduces often prohibitive tariffs (over 36 percent on average) on EU exports of agri-food products, opening a massive market to European farmers. For example, Indian tariffs on wines will be cut from 150 percent to 75 percent at entry into force and eventually to levels as low as 20 percent, tariffs on olive oil will go down from 45 percent to 0 percent over five years, while processed agricultural products such as bread and confectionery will see tariffs of up to 50 percent eliminated.
“Sensitive European agricultural sectors will be fully protected, as products such as beef, chicken meat, rice and sugar are excluded from liberalisation in the agreement. All Indian imports will continue to have to respect the EU’s strict health and food safety rules,” added the statement.
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Enhancing sustainability with €500 million commitment
The India-EU agreement also has a dedicated trade and sustainable development chapter, which enhances environmental protection and addresses climate change, protects workers’ rights, supports women’s empowerment, provides for a platform for dialogue and cooperation on trade-related environmental and climate issues and ensures effective implementation.
The EU and India will also sign a Memorandum of Understanding that intends to establish an EU-India platform for cooperation and support on climate action. The platform will be launched in the first half of 2026. Furthermore, subject to the EU’s budgetary and financial rules and procedures, €500 million in EU support over the next two years is envisaged to help India’s efforts to reduce greenhouse gas emissions and accelerate its long-term sustainable industrial transformation.
