India-EU FTA sealed after 18 years of talks

• By Thetripurapost Desk, New Delhi
• Jan 27, 2026
• 759

After nearly 18 years of negotiations, India and the European Union on Tuesday finally concluded a historic Free Trade Agreement (FTA) during the 16th India–EU Summit, marking one of the most significant trade breakthroughs in India’s recent economic diplomacy.
According to PTI, the agreement is expected to come into force in 2027. Once implemented, it will drastically cut tariffs on a wide range of goods, most notably European automobiles, liquor, and wine.
Major Tariff Reductions
One of the most eye-catching outcomes of the deal is the sharp reduction in import duty on European cars. The current 110% import tax on fully built European vehicles like BMW and Mercedes-Benz will be brought down to just 10%, making high-end European cars significantly cheaper in the Indian market.
However, the Indian government has placed an annual cap of 250,000 imported vehicles, indicating a calibrated opening aimed at protecting domestic manufacturing while allowing controlled market access.
At the same time, it is important to note that most premium European cars sold in India are already locally assembled, with import duties of around 15–16.5% on components. As a result, prices of many existing models may not see a dramatic fall, and the biggest impact will be on fully imported luxury vehicles.
The FTA also proposes a steep cut in tariffs on European liquor and wine, currently taxed at around 150%, which may be reduced to 20–30%. This is expected to reshape India’s premium alcohol market.
Economic Scale of the Deal
India is currently the world’s fourth-largest economy, while the European Union ranks second. Together, they account for about 25% of global GDP and nearly one-third of global trade. The agreement therefore carries weight not only commercially, but geopolitically.
European Commission President Ursula von der Leyen said the agreement would reduce tariffs worth €4 billion (approximately ₹43,000 crore) every year and generate millions of new jobs across both regions.
She stressed that the pact sends a strong global message that “cooperation, not isolation, is the best response to today’s global challenges.”
PM Modi: Not Just a Trade Deal, but a Strategic Roadmap
Prime Minister Narendra Modi, announcing the deal, described it as “not merely a trade agreement, but a roadmap to shared prosperity.”
He said the FTA will boost investment flows, innovation partnerships, and global supply-chain resilience. He also revealed that both sides will jointly push forward the India–Middle East–Europe Economic Corridor (IMEC), positioning the agreement within a broader strategic and connectivity framework.
Addressing the India–EU Business Forum, the Prime Minister warned that in today’s world, trade, technology, and rare minerals are increasingly being weaponised, and said India and the EU must work together to reduce over-dependence and build trusted supply chains.
Political and Emotional Undercurrents
European Council President Antonio Costa added a personal dimension to the summit, calling himself an “Overseas Indian.” Referring to his Goan roots, he said the India-EU partnership is “not only official, but deeply personal.”
Strategic Significance
Beyond tariff cuts, the India-EU FTA represents a strategic realignment at a time of global economic uncertainty, supply-chain disruptions, and geopolitical tensions. It strengthens India’s position as a key economic partner to Europe and reinforces the EU’s pivot towards the Indo-Pacific.
If implemented effectively, the agreement could redefine trade architecture, investment flows, and technological cooperation between two of the world’s largest economic blocs.