India and the European Union (EU) are close to finalising a long-awaited free trade agreement (FTA), expected to be announced at the India-EU Summit on January 27, 2026. Leaders from both sides, including the heads of the European Council and European Commission, will attend, highlighting the deal’s strategic importance. Once signed, it will need approval from the European Parliament, which may take about a year to implement.
The proposed deal, described by EU officials as a “mother of all trade deals,” aims to deepen economic ties between India and the 27-member EU bloc. Bilateral trade, which reached roughly $136–$190 billion in 2024–25, could grow significantly, benefiting exporters in sectors like textiles, garments, leather, and engineering goods.
India has maintained firm “red lines” on sensitive areas, including agriculture and dairy, to protect rural livelihoods and food security. It is also seeking phased tariff reductions in manufacturing to shield domestic industries while attracting European investment and integrating into supply chains.
The EU, meanwhile, wants greater access for its industrial goods and services, including automobiles and financial services. A key sticking point has been the EU’s climate-linked trade rules, such as the Carbon Border Adjustment Mechanism (CBAM). While the EU argues these ensure fair competition and align with its Green Deal, India has expressed concern that they could act as non-tariff barriers, especially for energy-intensive exports.
If finalised, the FTA could reduce tariffs on key items, expand market access for Indian goods and services, and strengthen economic cooperation amid global trade uncertainties. Negotiations, which resumed in 2022 after earlier stalls, reflect both sides’ commitment to closer ties and a more balanced trading relationship.
The deal is expected to set a benchmark for India’s trade relations with other major economies, providing a model for future agreements that balance economic growth, domestic protections, and climate commitments.
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