India and EU strike landmark trade deal after two decades of talks
January 27, 2026 Jamie Young Business Matters
India and the European Union have announced a landmark trade agreement, ending nearly 20 years of stop-start negotiations as both sides seek to deepen economic ties amid rising global trade tensions.
“This is the mother of all deals,” said Ursula von der Leyen at a briefing in Delhi, while Narendra Modi described the pact as “historic”.
The agreement will enable free trade in goods between the EU’s 27 member states and the world’s most populous country, together representing almost 25 per cent of global GDP and a combined market of around two billion people. It is expected to significantly reduce tariffs, improve market access and strengthen supply-chain integration on both sides.
Von der Leyen and António Costa were in Delhi for a bilateral summit with Modi, where the deal was finalised ahead of formal approval later this year by the European Parliament and the European Council.
Under the agreement, tariffs will be eliminated or phased down on most EU exports of chemicals, machinery and electrical equipment, as well as aircraft and spacecraft. Crucially for European carmakers, duties on motor vehicles, currently as high as 110 per cent, will be cut to 10 per cent under a quota of 250,000 vehicles. That quota is six times larger than the 37,000-unit allowance granted to the UK under its trade deal with India signed last July, according to Bloomberg.
For India, the deal will give “preferential access” to the EU for almost all exports, with textiles, leather goods, marine products, handicrafts, gems and jewellery among the biggest beneficiaries. Tariffs will also be reduced or removed on commodities such as tea, coffee, spices and processed foods, although Delhi said it had protected sensitive sectors including dairy, cereals, poultry, soy meal and certain fruits and vegetables.
Both sides said the agreement would boost investment flows, deepen manufacturing and services links and improve access for small businesses. A parallel mobility framework will ease short-term travel restrictions for professionals moving between India and the EU.
“This is India’s biggest free trade agreement,” Modi said. “It will make access to European markets easier for our farmers and small businesses, boost manufacturing and services, and strengthen innovative partnerships.”
The deal comes against a tense geopolitical backdrop. India is still grappling with 50 per cent tariffs imposed by Donald Trump last year, while talks on a continue to drag on. The EU has also faced pressure from Washington, including recent threats over Greenland, before the US president backed down.
Von der Leyen framed the agreement as a strategic response to those pressures. “This is the tale of two giants, the world’s second and fourth largest economies, choosing partnership in a true win-win fashion,” she said, calling it a “strong message that co-operation is the best answer to global challenges”.
Costa added that the deal sent an “important political message” at a time when protectionism is rising and “some countries have decided to increase tariffs”.
Beyond trade, India and the EU are also advancing talks on security, defence and climate co-operation. India’s defence minister Rajnath Singh said discussions with Kaja Kallas had covered defence supply chains, maritime security and cyber threats. A draft security and defence partnership is now in development, according to Reuters.
The EU is already India’s largest trading partner in goods, with bilateral merchandise trade reaching $136bn (£99.4bn) in 2024–25 — nearly double the level of a decade ago. Negotiations for a free trade agreement first began in 2007 but stalled in 2013 over market access and regulatory issues, before formally restarting in July 2022.
The breakthrough comes as both Delhi and Brussels look to secure alternative markets for exporters. India has signed major trade agreements in recent years with the UK, Australia, Oman and New Zealand, while a pact with the European Free Trade Association came into force last year. The EU, meanwhile, concluded a long-awaited trade deal with Mercosur earlier this month after 25 years of negotiations.
Formal signing of the India–EU agreement is expected later this year, once the legislative approval process on the European side is complete.
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