On January 27, 2026, Prime Minister Narendra Modi held a meeting with European Union (EU) Commission President Ursula von der Leyen and European Council President Antonio Costa at Hyderabad House in Delhi. The leaders of India and the European Union signed the largest Free Trade Agreement (FTA) between India and EU during the 16th India-EU Summit. Know 10 big things about this agreement…
1. India-EU agreement will cover 25% GDP
In the last 4 years, India has signed 7 FTAs, which include UK, Oman, New Zealand. Now on January 27, FTA with EU has been announced, which is being called Mother of All Deals. The biggest reason for this is that EU is a group of 27 countries and the largest trading block in the world. Whereas India is the biggest economy of the world. EU’s GDP is 22.53 trillion dollars, while India’s economy is 4 trillion dollars. By coming together of both, a market of 200 crore people will be created. It will also cover 25% of the world’s GDP. In 2025, India and EU had done trade worth Rs 12.5 lakh crore. After the arrival of FTA, India will have access to European markets like Berlin, Rome, Munich and Europe will have access to Indian markets like Delhi, Mumbai, Kolkata. It is estimated that with the FTA, India-EU trade will soon double.
2. Cars will become cheaper and the tariff on parts will be 0%
Tariff on cars will be gradually reduced from 110% to 10%, which will make high-end or special models of European companies like Audi, Mercedes-Benz and BMW cheaper in the Indian market. Tariffs on car parts will be reduced to zero. This will lead to deeper integration in the supply chain between India and Europe, meaning industries on both sides will be more closely connected and cooperation will increase. Europe is a big export market for Indian auto component suppliers, so Indian companies will benefit greatly from this deal. On the other hand, due to the high prices of parts made in Europe, the impact on India’s domestic manufacturing industry is expected to be limited.
3. Indian pharma industry will be strong
Tariffs of up to 11% on medicines coming from the EU to India will mostly be eliminated, but medicines going from India to the EU already have easy access. The EU currently imposes 0% or very low tariffs on most medicines exported from India. This Free Trade Agreement (FTA) will provide easier access to Indian generic medicines in the EU market, which can significantly increase the exports of Indian pharmaceutical companies. India is called the ‘Pharmacy of the World’, especially in the case of generic medicines. The EU already has no or very low duty on most Indian medicines, so this deal will further strengthen the Indian pharma industry. With this, cheaper and quality generic medicines will be more available in the EU, which will also benefit the patients of Europe. Due to this deal, India can benefit from 20-30% trade every year in pharmaceuticals and chemicals sector.
4. Indian textiles will shine in European markets
EU currently imposes 10% duty on Indian clothes and leather. This may reduce or end after FTA. With this, Indian clothes and shoes will become cheaper in Europe and their demand will increase. This will directly benefit people associated with industries like garments, leather, footwear in India.
5. Indian arms factories will be set up in Europe
After FTA with EU, India has become a defense supplier and manufacturing partner. This will give a boost to the Indian defense industry. EU countries like France, Germany, Spain and Italy sell advanced weapons to India. India’s defense production in 2024 will be Rs 1.5 lakh crore. Whereas defense export was Rs 25 thousand crores. Now after the deal, Indian arms companies will get access to SAFE funds that meet the defense needs of the EU. If this happens, Indian factories can be set up in Europe.
6. India’s IT professionals will benefit
Indian IT, professional and education services will get a big market in EU. Indian companies and professionals will get an opportunity to work in 144 service sectors of the EU. EU will get entry in 102 service sectors of India. It will be easier for Indian professionals to go to EU for work and business. Digital payments, online services and new technology will get a boost.
7. European liquor will be cheaper, aviation sector will also benefit
After this agreement, the heavy duty imposed on food products coming from Europe has been reduced. This means that now there will be zero tax on olive oil, margarine and other vegetable oils. Currently, 150% tariff is imposed on liquor from European countries. This will be reduced to 20–30%. The duty on beer will be reduced from 110% to 50% and the tax on spirits will be 40%. Apart from this, almost all the products related to aircraft and space will now come without tariff, which will be a big benefit to India’s aviation sector.
8. Supply chains of India and Europe will be connected
Ursula von der Leyen said that this agreement gives a clear message to the world that the best answer to global challenges is cooperation. With this free trade agreement, the supply chains of India and Europe will be connected and joint manufacturing power will be strengthened. He told that this will reduce tariffs by about 4 billion euros (43.5 thousand crore rupees) every year. Good jobs will be created for millions of people in India and Europe. The progress of India and Europe is important for the world.
9. India-EU trade to double by 2032
The total trade between India and EU in 2024-25 was $190 billion. During this period, India exported goods worth $75.9 billion and services worth $30 billion to European countries. At the same time, Europe sent goods worth $60.7 billion and services worth $23 billion to India. After this agreement, trade will double by 2032. The agreement will reduce tariffs on goods and services, which will make trade easier.
10. Why is it being called Mother of All Deals?
The world is looking for alternatives to America and China. In such a situation, this deal can make India a bigger manufacturing hub instead of China and can rapidly increase trade with Europe. Last year India-EU trade was Rs 12.5 lakh crore. After FTA, both the countries will get more access to each other’s markets and trade is expected to double. For this reason it is being called Mother of All Deals.
