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In a historic breakthrough that reshapes the global economic landscape, India and the European Union (EU) officially finalized a comprehensive Free Trade Agreement (FTA) on January 27, 202. The deal, dubbed the “mother of all trade deals,” concludes nearly *20 years of complex, on-and-off negotiations that first began in 2007.
By uniting the world’s most populous nation with the 27-member European bloc, the agreement creates a combined market of nearly 2 billion people, accounting for approximately 25% of global GDP.
Key Highlights of the Agreement
The pact is designed to dismantle long-standing trade barriers, offering unprecedented market access for both goods and services.
- Tariff Slashes: India’s Offer: India will eliminate or reduce duties on 96.6% of goods imported from the EU. This includes a dramatic phased reduction of automobile tariffs from 110% to 10% and significant cuts on wines, spirits, and machinery.
- EU’s Offer: The EU will remove tariffs on 99% of Indian exports, providing immediate duty-free access for labor-intensive sectors such as textiles, leather, and gems and jewelry.
- Manufacturing & “Make in India”: The deal is a massive win for India’s manufacturing sector. By lowering input costs for European machinery and chemicals, the FTA is expected to catalyze the “Make in India” initiative and integrate Indian MSMEs into European value chains.
- Services & Professional Mobility: A dedicated framework for the temporary movement of professionals (including IT workers and engineers) has been established. Indian service providers will gain predictable access to 144 subsectors in the EU, while India opens 102 subsectors to European firms.
Strategic & Economic Impact
Bilateral Trade – Expected to double from the current ~$140 billion by 2032.
Sustainability – Includes a €500 million EU climate support fund for India’s green transition.
Sensitive Sectors – Dairy, cereals, and poultry are strictly excluded to protect Indian farmers.
Geopolitical Shift – Reduces economic over-reliance on the US and China, reinforcing “strategic autonomy.”
“Europe and India are making history today. We have created a free trade zone of 2 billion people, with both sides set to benefit from this synergy.” Ursula von der Leyen, President of the European Commission.
What Happens Next?
The agreement will now undergo “legal scrubbing” and parliamentary ratification in both India and the EU. It is expected to be fully operational by early 2027.
