India and the European Union sealed a long-awaited Free Trade Agreement that diplomats are already calling one of the most consequential economic pacts of this decade.
The agreement was finalised at the India-EU Summit in New Delhi, with the President of the European Commission and the President of the European Council joining Prime Minister Narendra Modi, days after serving as Chief Guests at India’s Republic Day celebrations.
Two Decades in the Making
The deal brings to a close more than twenty years of negotiations and incremental partnership-building. India and the EU became strategic partners in 2004, anchored in shared democratic values, multilateralism and a commitment to a rules-based international order. Their relationship, however, dates back even further to 1962, when India was among the first countries to establish diplomatic ties with the European Economic Community, the EU’s predecessor.
Formal negotiations for a comprehensive trade pact were revived in 2021, alongside parallel talks on investment protection and geographical indications. Leaders set an ambitious deadline to conclude the package by the end of 2025. Continuous ministerial engagement through 2025 and early 2026 helped bridge long-standing gaps, culminating in the agreement announced in New Delhi.
Why the Timing Matters
The geopolitical backdrop has lent the pact unusual weight. The global economy is navigating renewed turbulence: US President Donald Trump’s return to aggressive tariff postures has unsettled markets, supply chains remain fragile after years of disruption, and the Russia-Ukraine war shows no sign of resolution.
Against this backdrop, an India-EU FTA sends a strong signal in favour of open, predictable and diversified trade at a moment when economic nationalism is again on the rise. Officials on both sides have described the agreement as a counterweight to tariff wars and fragmentation, and a statement of faith in multilateral cooperation.
A Partnership That Was Already Large
Even before the pact, the economic relationship was substantial. The European Union is India’s largest trading partner in goods, with bilateral trade touching about $136 billion in 2024-25, according to official figures. Services trade has also expanded steadily, reflecting deep links in information technology, finance and professional services.
Over the past decade, European companies have increased their presence in India’s manufacturing, clean energy and digital sectors. Indian firms, from IT services to pharmaceuticals, have strengthened their footprint across Europe. Yet both sides have long argued that trade remains “below potential”, constrained by tariffs, regulatory barriers and fragmented standards.
The new agreement aims to change that. Diplomats describe it as “balanced and forward-looking”, promising lower tariffs, easier regulatory pathways, wider market access in services and stronger supply-chain resilience. For India, the prize is improved entry into a 450-million-strong consumer market. For Europe, it is a deeper anchor in one of the world’s fastest-growing major economies.
More Than a Trade Agreement
The FTA is also the economic pillar of a broader strategic convergence that has accelerated in recent years. Cooperation now spans defence and maritime security, clean energy and climate action, digital technologies, space and connectivity.
A key milestone was the creation of the India-EU Trade and Technology Council in 2022, only the EU’s second such council after the one with the United States. The move reflected a shared recognition that trade, technology and security are increasingly inseparable in a world shaped by supply-chain risks and technological rivalry.
Security ties have deepened as well, with joint naval exercises in the Indian Ocean and expanding dialogue on defence industrial collaboration. On climate and energy, Europe has emerged as a critical partner in India’s push towards renewables, green hydrogen and sustainable urban mobility.
Connectivity is another strategic strand. The India-EU Connectivity Partnership and the ambitious India-Middle East-Europe Economic Corridor (IMEC) signal a shared interest in building transparent and sustainable infrastructure across continents. The FTA is expected to give these initiatives a stronger commercial backbone.
The Republic Day Signal
That the EU’s top leadership chose to attend India’s Republic Day as Chief Guests was no accident. Diplomats note that the entire EU College of Commissioners had recently visited India as a group for the first time, underlining Europe’s growing focus on New Delhi as a strategic partner beyond trade.
At the summit, leaders framed the pact as a 'future-oriented' agreement, designed to support resilient supply chains, trusted technologies and sustainable growth. The symbolism was deliberate: Europe, officials say, now sees India not merely as a market, but as a central pillar of its Indo-Pacific and global strategy.
Obstacles That Nearly Derailed the Deal
The road to agreement was far from smooth. Differences over market access in sensitive sectors, environmental and labour standards, data flows, and public procurement have repeatedly slowed progress in the past. What changed, negotiators argue, was the broader context.
The need to de-risk supply chains away from over-dependence on any single geography, and to uphold a rules-based trading system under pressure, injected fresh urgency into the talks. Compromise became a strategic necessity rather than a political risk.
A Handshake With Global Echoes
The agreement announced in New Delhi marks not just the end of a long negotiation, but the beginning of a new phase in India-EU relations, one that binds economics, strategy and shared values more tightly than ever before.
In a world increasingly defined by uncertainty, the handshake in New Delhi is expected to resonate far beyond Raisina Hill: as a statement that two major democratic powers are choosing cooperation over confrontation, and integration over isolation.
