India-EU FTA Sealed: Services and Mobility Redefined in Landmark Deal

A Landmark Economic Partnership

India and the European Union have concluded a comprehensive Free Trade Agreement (FTA), establishing a new framework for economic cooperation between two of the world's largest democracies. The agreement, finalized on January 27, 2026, links India to the 27-nation EU bloc, creating a combined market of nearly two billion people that accounts for approximately a quarter of the global GDP. This pact is positioned as a strategic move to foster rules-based trade and deepen economic integration amid global uncertainties and shifting supply chains.

After nearly two decades of negotiations that first began in 2007 and were revived in 2022, the deal aims to reshape bilateral commerce. The EU is India's largest trading partner in goods, with trade valued at around $136 billion in FY25, while trade in services stood at $13 billion in 2024. Officials anticipate these figures will rise significantly once the agreement is implemented.

Services Sector: The Core of the Agreement

Unlike traditional trade pacts focused primarily on goods, the India-EU FTA places significant emphasis on the services sector. The agreement provides Indian service providers with predictable and expanded market access across 144 subsectors in the EU. This includes key areas of Indian strength such as information technology and IT-enabled services, professional services, education, financial services, tourism, and construction. This enhanced access is expected to help Indian companies scale their operations and offer competitive services to European consumers.

In return, India will open 102 of its services subsectors to EU companies. This move is anticipated to attract greater European investment and high-end services into the Indian market, fostering innovation and technology transfer. The financial services chapter, in particular, promotes cooperation in areas like cross-border electronic payments and fintech, aiming to deepen financial integration between the two economies.

A New Era for Professional Mobility

A major highlight of the FTA is a future-ready mobility framework designed to facilitate the temporary movement of professionals. This addresses a long-standing demand from Indian industry and creates a predictable environment for skilled and semi-skilled workers. The framework covers intra-corporate transferees (ICTs), business visitors, and other categories essential for services trade. Crucially, it also grants entry and work rights for the dependents and family members of ICTs.

The EU has committed to providing market access in 37 sectors for contractual service suppliers and 17 sectors for independent professionals from India. These include high-demand areas like computer and related services, research and development, and professional services. The pact also supports student mobility, allowing Indian students graduating from EU institutions a nine-to-twelve-month period to seek employment, thereby strengthening the talent pipeline.

Sweeping Tariff Reductions on Goods

The agreement introduces substantial tariff reductions. The EU will liberalize 99.5% of its tariff lines on goods imported from India over seven years, while India will eliminate or reduce duties on 96.6% of goods from the EU. This is expected to provide a significant boost to India's labour-intensive manufacturing sectors. Industries like textiles, leather goods, and gems and jewellery will gain zero-duty access to the EU market. For instance, tariffs on leather goods, currently as high as 17%, will be eliminated.

For European exporters, the changes are also significant. Indian tariffs on motor vehicles will fall from 110% to as low as 10%, subject to quotas. Tariffs on European wines will be cut from 150% to a range of 20-30%, and duties on olive oil will be eliminated from 45% over five years.

Protecting Sensitive Industries

While opening its markets, India has ensured the protection of its sensitive agricultural sectors. Politically important areas such as dairy, poultry, rice, and sugar have been kept outside the scope of liberalization. This measure is intended to safeguard the livelihoods of millions of farmers and maintain stability in the rural economy. At the same time, the agreement provides zero-duty access for several Indian agricultural exports like tea, coffee, spices, and certain fruits and vegetables, improving their competitiveness in European markets.

Strategic Dimensions: Beyond Trade

The FTA is complemented by a broader strategic agenda. India and the EU have also launched a security and defence partnership focused on maritime security, counter-terrorism, and cyber threats. This aligns with efforts to diversify supply chains and build resilient economic partnerships based on shared democratic values. The agreement also includes provisions for cooperation on green technologies to help Indian manufacturers comply with emerging EU climate regulations like the Carbon Border Adjustment Mechanism (CBAM).

Furthermore, the pact establishes a framework to negotiate social security agreements over the next five years. This could address the issue of double contributions by Indian professionals working in Europe, improving their long-term financial security.

The Path to Implementation

Following the conclusion of negotiations, the agreement will undergo a legal review and translation. It must then be ratified by the Indian Parliament and the European Parliament and Council. Once both sides complete their respective domestic procedures, the FTA will enter into force. The tariff reductions and other regulatory provisions will be phased in gradually over a period of up to ten years, allowing industries on both sides to adapt to the new trade environment.