By Micah Jonah
January 23, 2026
India and the European Union are on the verge of sealing a long awaited free trade agreement, with officials hinting that a formal announcement could be made during the upcoming India-EU Summit in New Delhi, as both sides seek to strengthen economic cooperation in the face of rising global trade tensions.
Government sources say once the agreement is signed and ratified by the European Parliament, a process expected to last at least one year, it will significantly boost trade volumes, expand market access for Indian exports, especially in textiles and jewellery, which have recently suffered losses following increased tariffs imposed by the United States.
The proposed deal is coming at a time when international trade is becoming more restrictive, forcing India to pursue wider access for its goods and services across major markets. For the European Union, the agreement is viewed as a strategic move to diversify supply chains and reduce overdependence on China, while tapping into India’s fast growing consumer and industrial markets.
Trade between both partners has continued to grow steadily, with total exchange in goods and services estimated at over 190 billion dollars in the last financial year. India exported about 76 billion dollars worth of goods and 30 billion dollars in services to the 27 nation European bloc, positioning the EU among India’s top trading partners alongside the United States and China.
Although average EU tariffs on Indian products remain relatively low, labour intensive exports such as garments and textiles still face higher duties. Economic analysts believe the trade deal could help Indian manufacturers regain competitiveness lost after the EU began withdrawing special tariff concessions on several products in 2023. India is also pressing for easier movement of professionals and greater access for its information technology and digital services.
European exporters, on the other hand, currently face much higher tariffs when entering the Indian market, particularly in automobiles, chemicals and industrial machinery. Industry experts say tariff reductions would open major opportunities for European firms in vehicles, aircraft, equipment manufacturing and chemicals, while also improving access to services, public procurement, long term investments.
However, several sensitive sectors remain unresolved. Agriculture and dairy products are excluded from the agreement, while India is resisting pressure to remove tariffs on most goods, opting instead for limited market opening to protect local industries. Automobiles, wine and spirits are also politically sensitive, with authorities considering gradual tariff reductions rather than immediate cuts.
India is further demanding recognition under European data protection regulations, easier mobility for skilled workers and exemption from double social security payments. In contrast, the EU is pushing for stronger commitments on labour standards, environmental protection and intellectual property enforcement.
Two major concerns for India remain the European Union’s carbon border levy, which could reduce the gains from lower tariffs, and strict regulatory procedures that often raise compliance costs and delay product entry into European markets.
Trade analysts say rising geopolitical tensions and recent global trade disruptions have forced both parties to adopt a more pragmatic approach towards finalising the agreement. They add that the real impact of the deal will ultimately depend on how effectively issues such as carbon taxation, professional mobility, regulatory barriers are addressed in the final framework.
