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India and EU Finalize Landmark Free‑Trade Pact, Await Formal Signing After Legal Review

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Deal Finalized After Two Decades of Negotiations On Jan 27 Prime Minister Narendra Modi announced that India and the European Union have concluded a free‑trade agreement, ending negotiations that began in 2007 and were revived in 2022. Both sides labeled it the “mother of all deals,” reflecting its unprecedented scope. The pact creates a free‑trade zone linking 27 EU members with a two‑billion‑person market that accounts for roughly a quarter of global GDP[2][3].

Tariff Reductions Target Key Industrial Sectors The agreement eliminates duties on chemicals, machinery, electrical equipment, aircraft and spacecraft, and cuts car tariffs from up to 110 % to 10 % under a quota of 250,000 vehicles[2][1]. Agricultural products such as dairy and sugar remain excluded, while phased cuts are planned for wine, spirits and other sensitive items[4]. These measures are expected to lower prices for EU goods in India and boost Indian exports in labor‑intensive sectors[1].

Legal Vetting and Formal Signing Scheduled Later This Year The pact will undergo a five‑to‑six‑month legal review before a formal signing ceremony, likely at a joint India‑EU summit in New Delhi where Modi and von der Leyen will outline implementation details[1]. Ratification by the European Parliament and Council is required before the agreement becomes effective[2]. Officials anticipate full implementation within a year of signing[1].

Trade Volume Goals and US Tariff Context Bilateral trade reached $136.5 billion in FY 2024‑25, and the partners aim to lift it to about $200 billion by 2030[3]. The deal arrives as the United States has imposed 50 % tariffs on Indian imports, prompting Delhi to diversify its markets[1][2]. EU officials frame the pact as part of a broader strategy for strategic autonomy and reduced reliance on China and the United States[3].

Remaining Issues Include Carbon Border Tax India remains concerned about the EU’s Carbon Border Adjustment Mechanism, which imposes a charge on Indian exports and could burden SMEs[4]. Negotiators are discussing phased tariff cuts and intellectual‑property safeguards to address such sensitivities[4]. No final resolution on the carbon tax was announced in the Jan 27 statements[4].

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Timeline

2007 – The European Union and India launch the first round of free‑trade negotiations, beginning a dialogue that will stretch over two decades. [1]

July 2022 – After a long pause, both sides revive the stalled talks, re‑energizing the effort to craft a comprehensive trade pact. [1]

2023 – The EU withdraws its Generalised System of Preferences (GSP) for India, stripping away preferential tariff treatment and prompting India to look for new market partners. [2]

2024 – The United States adds a 25 % extra levy on Indian goods for buying discounted Russian oil, bringing total US tariffs on India to 50 % and heightening Delhi’s urgency to diversify its trade relationships. [4]

Dec 15, 2025 – Commerce Secretary Rajesh Agrawal tells reporters that negotiations have entered the “most difficult stage” after 16 rounds, highlighting the complexity of closing the deal. [6]

Jan 1, 2026 – The EU’s Carbon Border Adjustment Mechanism (CBAM) comes into force, taxing Indian steel and aluminium imports; Congress leader Jairam Ramesh calls the tax a “non‑tariff barrier” that the pending FTA must address. [8]

Jan 6‑7, 2026 – India’s Commerce Secretary Rajesh Agrawal meets EU Trade Director‑General Sabine Weyand in Brussels to stock‑take progress and narrow divergences ahead of ministerial talks. [5][6]

Jan 9‑10, 2026 – Commerce and Industry Minister Piyush Goyal conducts a two‑day Brussels visit, holding high‑level talks with EU Trade Commissioner Maroš Šefčovič; both sides report steady progress on market‑access, rules‑of‑origin and services tracks, and Goyal says the meetings “clear the path for an early conclusion.” [5][6][7]

Jan 24, 2026 – European Council President Antonio Costa and Commission President Ursula von der Leyen attend India’s Republic Day celebrations on Jan 26 and pledge to push the “mother of all deals” forward, noting that reinstating the EU GSP would cut tariffs on garments, pharmaceuticals, steel and machinery. [2]

Jan 27, 2026 – Prime Minister Narendra Modi announces that India and the EU have finalized a landmark free‑trade agreement, dubbing it the “mother of all deals.” The pact links 2 billion people and 25 % of global GDP, eliminates tariffs on chemicals, machinery and aircraft, and reduces car duties to 10 % under a 250,000‑vehicle quota. Formal signing awaits EU Parliament ratification, with a five‑to‑six‑month legal vetting period and implementation expected within a year. Bilateral trade reached $136.5 billion in FY 2024‑25, and officials set a $200 billion target by 2030. [1][3][4]

Late 2026 (expected) – The European Parliament and Council complete ratification of the India‑EU FTA; the agreement is formally signed and begins delivering price advantages for EU goods and export boosts for Indian labour‑intensive sectors, as former trade official Ajay Srivastava predicts. [3][4]

2030 (target) – India and the EU aim to lift bilateral trade to roughly $200 billion, reflecting the long‑term ambition of the free‑trade partnership. [4]

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