After nearly two decades of negotiations, India and the EU announced the successful conclusion of the Free Trade Agreement (FTA) negotiations during the state visit of the President of the European Council, António Luís Santos da Costa, and the President of the European Commission, Ursula von der Leyen, to New Delhi in late January 2026. The presence of EU’s leadership at India’s 77th Republic Day celebrations—the first time EU leaders have held this honour—sent a clear message that the second and fourth largest economies in the world are no longer distant democracies.

Prime Minister Modi and the EU leadership described the FTA as a “historic deal” and a “milestone in the India–EU Strategic Partnership.” While the economy remains the key cornerstone of this visit and the deal, the geopolitical hedge it has created will be equally vital to both partners. At a time when global stability is under siege from a state-centric China and a Trump-centric US, New Delhi and Brussels have chosen to shed their cautious diplomatic DNA and take a leap forward together.

The FTA will serve as economic fuel for a broader strategic policy in which the pragmatic interests of these two massive economies will finally intersect.

Economic Integration

The India–EU FTA negotiations began in 2007 but were suspended in 2013 due to differences over market access. Negotiations restarted in 2022, with European leaders hailing it as the “mother of all deals” upon its conclusion in 2026.

The FTA is projected to create a free trade zone of around 2 billion people, accounting for 25 per cent of the global GDP. As part of this deal, India will see tariff reductions on 99.5 per cent of its trade with the EU. 90.7 per cent of India’s exports will be completely free of tariffs. This will include labour-intensive sectors, such as textiles, leather and footwear, spices, gems and jewellery, among others. The EU has also committed to opening 144 service subsectors in IT, professional services, education, and other services to India. On the other hand, Europe has secured elimination and reductions of duties or tariffs on 97.5 per cent of  exports, of which 49.6 per cent will be completely free of tariffs or duties. These duty-free sectors include machinery and electrical equipment, aircraft and spacecraft, optical, medical, and surgical equipment, and plastics, among others. Europe’s significant gain comes from India’s agreement to reduce tariffs on its automobiles, wines, and spirits, which have long been points of contention. For cars, duties have been cut from a previous high of 110 to as low as 10 per cent (to be rolled out in a phased manner). The duty on wine has been reduced from 150 to 20-30 per cent, depending on the wine's price, and is subject to quotas.

That said, the transition from signing to successful implementation will remain the FTA’s ultimate test. Sometimes, geopolitical gains outweigh the advantages of the ledger. Take for example the Indo–US civil nuclear deal of 2008, which served as an important geopolitical pivot but yielded modest returns. The FTA, too, faces significant implementation challenges. India’s NITI Aayog has recently reported that the country’s trade deficit with its existing FTA partners has widened. India is also known to undermine its own trade agreements after signing them. Further, the Carbon Border Adjustment Mechanism (CBAM) remains a looming non-tariff barrier for Indian steel and aluminium as the agreement provides no direct relief but includes a framework for constructive engagement on CBAM. India’s complex federal structure will also pose a challenge, as several FTA-related sectors are under state jurisdiction, requiring cooperative centre-state engagement. For the EU, the conclusion of the negotiations is the start of a rigorous technical process: the deal will be translated into the EU’s 24 official languages and undergo legal scrutiny before it reaches the ratification stage in the European Parliament.

A Geopolitical Leap

The FTA is a timely and necessary fuel for India and the EU’s strategic engine. It is rooted in the geopolitical pressures of the 2020s. De-risking through diversification is a key feature of New Delhi and Brussels’ strategic realism. This deal is a cornerstone of Europe’s de-risking strategy, which aims to avoid mirroring its Russia vulnerabilities with China. Diversifying through India allows the EU to gain a foothold in one of the fastest-growing large economies that shares its democratic values, thereby strengthening its global relevance. India anchoring itself to the EU allows access to technology and a capital-rich partner outside the Washington–Beijing binary. Washington’s 50 per cent punitive tariffs and its outreach to Islamabad would have aided New Delhi’s final push. The conclusion now allows both parties to build a buffer against an unpredictable world order.

The accompanying signing of the Security and Defence Partnership and mutual endorsement of the ‘Towards 2030: A Joint India-European Union Comprehensive Strategic Agenda’ further signify the FTA’s geopolitical leap. The partnership adds a holistic security angle through cooperation in maritime security, joint naval operations in the Indo-Pacific, and defence industrial co-development. This will enable India to diversify its defence hardware further away from Russian sources while giving Europeans a trusted market for its defence technology. The security alignment on cyber defence, counter-terrorism, and space security will help both sides achieve more substantial gains.

The ‘Towards 2030’ agenda ensures that this economic and geopolitical roadmap is structured across five pillars: prosperity and sustainability, technology and innovation, security and defence, connectivity and global issues, and enablers (human mobility). The alignment of this five-year plan aims to make the India-EU partnership resilient enough to withstand global disruptions—from trade wars to maritime tensions.

Conclusion

After being historically characterised as diplomacy that moves at a glacial pace, the 2026 India-EU Summit marked a moment in which two deliberative democracies decided against standing still. India and Europe have instead chosen to build a bridge in an era where many states are retreating into fortresses. With the FTA now concluded, the journey towards implementation will require patient navigation of regulatory standards, trade regimes, and domestic polities. Its implementation over the coming years will hopefully allow India and the EU to enhance their economies and position themselves as the necessary third pillar of a stable, multipolar world order.

Ashutosh Nagda is a Senior Researcher with IPCS’ Centre for Internal and Regional Security (IReS).