The India-European Union Free Trade Agreement, concluded on January 27, 2026, negotiated over nearly two decades and finalised amid heightened US protectionism, positions India and the EU as strategic alternatives in the current global trading system.
The 21-chapter agreement, which grants India market access covering 99 percent of exports by trade value, arrives at a time when the Trump administration’s 50 percent tariffs threaten to reduce India’s GDP growth by 0.8 percent and jeopardise USD 35 billion in annual exports.
“The India-EU FTA places India in a stronger global position by moving it from a largely defensive, tariff-focused negotiator to a rule-based counterparty dealing with one of the world’s largest economic blocs,” said Rahul Hingmire, managing partner at Vis Legis Law Practice. “The agreement goes beyond tariffs and locks in commitments on goods, services, digital trade and dispute resolution, which improves India’s credibility and predictability in global trade talks.”
With the US imposing 50 percent tariffs on Indian goods, comprising a 25 percent reciprocal tariff plus an additional 25 percent penalty linked to India’s Russian oil imports, the FTA creates a legally secured alternative market for both India and the EU.
India diversifies away from dependence on volatile U.S. trade relations though in the long run India will seek to have a trade deal in place with the U.S. as well. The FTA positions India as a credible alternative manufacturing base for EU companies seeking to diversify supply chains away from China,” said Sudhanshu Roy, partner, international litigation & arbitration department at Foley Hoag LLP.
“The India-EU FTA has combined India, as the single 4th largest economy in the world in nominal GDP, with a grouping that spans 25% of global GDP,” said Arjun Goswami, director of public policy at Cyril Amarchand Mangaldas. The combined 2-billion-person market represents more than one-third of international trade.
Rishabh Gandhi, founder of Rishabh Gandhi and Advocates, characterised the agreement as “diversification by design, not retaliation.” “Legally, it creates a preferential, treaty-protected trade corridor. Both sides reduce dependence on a volatile third market without breaching WTO rules. Supply chains can be re-routed lawfully, not defensively.”
Benchmark for future negotiations
This ‘mother of all deals’ will significantly influence India’s ongoing negotiations with the UK, ASEAN, and other trading partners, especially on intellectual property protections, data localisation and investment rules.
“This is the largest of all FTAs till date and rightly termed the ‘mother of all deals’, underlining India’s strategic role, strong prominence as an economic powerhouse in the global economic landscape,” said Santosh Iyer, MD, CEO at Mercedes Benz India.
The July 2025 India – UK FTA is highly liberal on goods, with the UK set to eliminate tariffs on all its tariff lines over seven years, covering about 99.6 percent of Indian exports by value, while India will remove or reduce tariffs on around 90 percent of its lines over 10 years, covering roughly 92 percent of UK imports.
“Whilst the India-EU FTA digital trade chapter has sought to facilitate free flow of data, it has likely allowed some policy space for data localisation by India and this will therefore provide a relevant benchmark for the UK FTA,” said Goswami.
India – ASEAN FTA 2010 sets a cautionary precedent, as imports from ASEAN have grown much faster than exports and India is openly weighing the agreement’s termination clause during an ongoing review.
The India – EU FTA reinforces TRIPS IP protections with Doha flexibilities for generics and no data exclusivity or database sui generis rights. It recognises India’s TKDL against biopiracy and commits to IP enforcement/digital cooperation.
“By embedding comprehensive chapters on intellectual property, digital trade, and investment rules, the FTA sets a precedent that will shape India’s ongoing talks with the UK, ASEAN, and others, particularly on sensitive issues like data localisation and regulatory sovereignty,” said Hardeep Sachdeva, senior partner at AZB & Partners.
“The agreement sets a new benchmark for India’s future negotiations by clarifying what it is now willing to accept and what it will firmly ring-fence,” said Hingmire. “India has agreed to stronger IP protections where the commercial upside is substantial, while still preserving policy space on data and digital regulation through carefully drafted exceptions.”
“India signals flexibility on IP and data flows, but with clear carve-outs for public health and regulation. Future partners will push for parity, but India can credibly say: this is our outer limit, not our default,” said Gandhi.
Safeguards for domestic industries
The FTA commits India to effective enforcement of existing domestic labour laws while explicitly preserving India’s right to set its own standards without alignment to EU levels. This safeguard’s effectiveness depends on genuine enforcement of Indian labour law, which has remained a noted challenge in informal sectors where the textile, footwear, and apparel industries operate. Also, the agreement includes no enforcement mechanism beyond state-to-state dispute resolution.
Despite the EU’s projection of doubled exports by 2032 and 800,000 additional jobs in Europe, legal experts point to multiple safeguards protecting Indian workers and industries.
“Indian workers and industries are protected through a layered legal framework built into the agreement,” Hingmire said. “Sensitive agricultural products are excluded, tariff cuts in sectors like automobiles are controlled through quotas and timelines, and safeguard clauses allow India to restrict imports if domestic markets are disrupted.”
“The FTA includes a dedicated bilateral safeguard mechanism that allows India to impose temporary protective measures if a significant increase in preferential imports due to the FTA causes, or threatens to cause, serious injury to domestic industry,” said Roy. “The agreement protects both parties’ right to regulate and ensures that parties will not weaken, waive, or fail to enforce their laws in order to encourage trade or investment. This prevents a “race to the bottom” by ensuring that labour or environmental standards are not eroded.”
Automobile tariffs will decline from 110 percent to 10 percent over five years under an annual quota of 250,000 vehicles, while core agricultural products like dairy, cereals, and meat, remain excluded from tariff elimination.
“Market opening is phased, not abrupt. Safeguard clauses and trade-remedy rights remain fully available. Sensitive sectors can still be protected through lawful anti-dumping and countervailing measures,” opined Gandhi.
“While the EU projects doubled exports and significant job creation by 2032, India has negotiated safeguard clauses, phased tariff reductions, and labour protections to shield domestic industries and workers from sudden shocks,” said Sachdeva.
Unlike static trade agreements, the India-EU FTA embeds multiple review, consultation, and response mechanisms to address multifarious objectives, dynamic nature of trade, fast-evolving technologies and increasing regulatory complexities.
“The safeguards are real, but their effectiveness will depend on timely and active enforcement by Indian authorities,” Hingmire cautioned, noting that the agreement includes labour standards without harmonisation, preserving India’s comparative advantage while committing to ILO standards enforcement.
