India and EU clinch long-awaited free trade pact and launch new security partnership

NEW DELHI — On a cool January morning in New Delhi, as Indian tricolors flew alongside the blue and gold of the European Union, leaders from both sides brought to a close nearly two decades of on-and-off bargaining.

Deal reached after years of stop-start negotiations

On Jan. 27, India and the EU announced they had wrapped up negotiations on a sweeping free trade agreement and, in a parallel move, signed a new Security and Defence Partnership that ties Europe more closely into the Indo-Pacific.

The two deals, unveiled at a summit in the Indian capital, are framed by both sides as a turning point: a massive opening of markets and a formal framework for cooperation on security, struck at a time of rising tariffs, wariness over China and questions about the future of globalization.

European Commission President Ursula von der Leyen hailed the outcome as “the mother of all deals,” telling Prime Minister Narendra Modi that Europe and India were “making history” by opening a free-trade zone that she said would cover some 2 billion people. Modi called it “the largest ever free trade agreement in our history” and said it would create “massive opportunities for 1.4 billion Indians and millions of people in European countries.”

Ratification still ahead

The commercial accord will not come into force immediately. Negotiators have concluded and “initialled” the text, but it must still go through legal review, translation into the EU’s 24 official languages, formal signing and ratification in Brussels and New Delhi. Officials on both sides say they hope it can take effect late this year or in early 2027.

Even with that caveat, the broad outlines are clear. According to officials’ descriptions, the agreement will eliminate or sharply cut tariffs on roughly 96% to 97% of trade in goods by value between the world’s fifth-largest economy and its second-largest single market.

India has agreed to open around 92% of its tariff lines, covering about 97.5% of EU exports by value over time. The EU will scrap duties on about 96.8% of its tariff lines, giving near-duty-free access to between 99% and 99.5% of Indian exports by value, most within seven years.

Big cuts for cars, wine and spirits

European manufacturers in sectors from cars to chemicals stand to benefit from sharply lower Indian tariffs. New Delhi has agreed to cut duties on imported European cars from levels that can reach 110% down to about 10%, phased in over roughly five years and subject to an annual quota that officials say will be in the hundreds of thousands of vehicles. High-end and electric models are expected to gain most, while low-cost small cars — politically sensitive in India — will remain more protected.

Tariffs on European wine and spirits, long a sticking point, will also fall steeply. Duties on many wines are to be reduced from 150% to roughly 20% to 30% over time, while levies on spirits would fall to about 40%. Duties on many processed foods such as pasta, chocolate and fruit juices will be phased out.

India gains on labor-intensive exports and mobility

In return, Indian exporters will receive expanded access to the EU for labor-intensive goods including textiles, leather and footwear, marine products, gems and jewelry, toys and sports goods. Indian officials have projected that the deal could unlock export opportunities worth several trillion rupees across India’s states over the coming decade.

Both sides have left out some of their most politically sensitive products. Dairy, sugar and a range of meat and cereal products are largely excluded or only minimally liberalized, reflecting concerns of small farmers and powerful agricultural lobbies in both Europe and India.

Beyond tariffs, the agreement includes chapters on services, investment, intellectual property, sustainable development and regulatory cooperation. EU officials describe the services package as the most far-reaching India has granted any partner, particularly in financial services and maritime transport.

A linked mobility framework will make it easier for Indian firms to send skilled workers and intra-company transferees to Europe, and for students and professionals to move between the two markets. Details will depend in part on national implementation by EU member states, but Indian officials have highlighted the potential gains for IT workers, engineers, nurses and students.

Climate support and sustainability provisions

The deal also touches on climate policy, a growing flashpoint between Brussels and emerging economies. The EU has agreed to provide about 500 million euros in support over two years to help Indian industry decarbonize and adapt to measures such as its Carbon Border Adjustment Mechanism, which will impose levies on imports of high-emissions products like steel, cement and aluminum.

Both sides have committed in a sustainable development chapter to uphold the Paris climate agreement, core labor standards and biodiversity goals, and to cooperate rather than rely on sanctions to resolve disputes arising from environmental or labor provisions. Environmental advocates and some lawmakers in Europe are likely to scrutinize whether those commitments are enforceable enough and how they interact with the EU’s domestic climate laws.

Why the economic stakes are high

Current annual trade in goods between the two amounts to well over 100 billion euros, with services adding tens of billions more. Brussels estimates the new agreement could eventually double EU goods exports to India and save European firms around 4 billion euros a year in tariffs. New Delhi sees the deal as a boost for its Make in India manufacturing drive and a way to anchor more European investment and technology in the country.

Politically, the timing and scope of the agreement are as significant as the numbers. Negotiations for an India-EU trade pact began in 2007 under the name Broad-based Trade and Investment Agreement but broke down in 2013 over disputes on tariffs for cars and alcohol, as well as agriculture, public procurement and protections for generic medicines.

For much of the following decade, India was seen as a reluctant participant in deep trade deals, pulling out of the Regional Comprehensive Economic Partnership in 2019 and moving cautiously on other talks.

Talks with the EU were relaunched in 2022 amid wider reassessments of global supply chains, pressure to “de-risk” from China and concerns about the direction of U.S. trade policy. The latest phase of negotiations accelerated in 2024 and 2025, as both sides faced higher tariffs under U.S. President Donald Trump and sought to lock in reliable alternatives for key goods and technologies.

A new EU-India security and defence partnership

The partnership announced in New Delhi extends beyond commerce. On the same day that negotiators declared the trade talks concluded, EU foreign policy chief Kaja Kallas and Indian External Affairs Minister Subrahmanyam Jaishankar signed a new EU-India Security and Defence Partnership, a framework that for the first time groups a long list of security-related activities under a single banner.

The document sets out plans for closer cooperation on maritime security — particularly in the Indo-Pacific — along with cyber defense, artificial intelligence and emerging technologies, counterterrorism, hybrid threats, critical infrastructure resilience, space security, nonproliferation and defense industrial collaboration. It also references cooperation on peacekeeping, sanctions implementation, organized crime and the Women, Peace and Security agenda.

Kallas described the deal as marking a “new phase” in EU-India relations, saying that “security is now a core part of our relationship.” She pointed to earlier joint activities between Indian naval forces and the EU’s anti-piracy mission off the Horn of Africa as a model for expanded work together at sea.

The partnership does not amount to a mutual defense treaty and falls well short of alliance commitments such as those under the North Atlantic Treaty Organization. Instead, it creates an annual Security and Defence Dialogue and a set of thematic working groups to coordinate policies, share information and plan possible joint exercises or capacity-building missions in third countries.

For the EU, which published its Indo-Pacific strategy in 2021, the move signals an intent to be more than an economic actor in the region without deploying the kind of military power projected by the United States or China. For India, it offers another major partner alongside existing arrangements with the United States, Japan, Australia and others, while preserving its longstanding policy of strategic autonomy and continuing ties with Russia.

Risks, scrutiny and the politics of ratification

The alignment comes with risks and unresolved tensions. In Europe, the trade agreement will need approval from the European Parliament and, depending on its legal form, some national or regional parliaments. Past experiences with deals such as the EU-Canada Comprehensive Economic and Trade Agreement and the stalled accord with the Mercosur bloc suggest that opposition from farm groups, environmental activists and human rights advocates can delay or reshape agreements at a late stage.

Critics in Europe are expected to raise questions about labor rights, environmental enforcement and civil liberties in India, and about the impact of increased imports on small farmers and manufacturers. In India, industry groups in sectors such as autos and processed food have voiced concerns about competing with European imports, even as export-oriented businesses welcome new opportunities.

The government in New Delhi has presented the FTA as proof that India can open its markets on its own terms. Opponents at home may argue that the benefits will flow first to larger companies and skilled workers, while the costs fall more heavily on smaller producers and informal workers, at least in the short term.

What comes next

Despite these uncertainties, both sides have framed the twin agreements as part of a broader effort to shore up rules-based trade and security ties at a time of turbulence. In their joint statement, EU and Indian leaders emphasized shared commitments to democracy and the United Nations Charter, and cast the deals as tools to support resilient supply chains, open sea lanes and “a stable and secure Indo-Pacific.”

As the motorcades left Hyderabad House and the ceremonial flags came down, the work ahead shifted from negotiating tables to parliaments, factories and ports. The coming months will test whether the “mother of all deals” and its accompanying security pact can move from summit headlines to lived reality in European and Indian economies — and whether they will become the foundation of a lasting partnership or another ambitious package reshaped by politics before it ever fully takes effect.