After nearly two decades of negotiations, the India-European Union (EU) Free Trade Agreement (FTA) is reportedly on the cusp of finalization. As of January 2026, internal sources suggest that the deal may grant 90% duty-free access to Indian goods, marking a historic pivot in India’s trade strategy.
With a formal announcement expected around January 27, 2026, during the visit of top EU leadership for India’s 77th Republic Day, this deal is being hailed as the “mother of all trade deals.”
The 90% Threshold: Restoring India’s Export Edge
The proposed agreement aims to eliminate almost all tariff and non-tariff barriers, providing a critical buffer for Indian exporters currently facing high US tariffs and the recent suspension of EU trade perks.
The GSP vs. FTA Shift
On January 1, 2026, the EU officially suspended its Generalised Scheme of Preferences (GSP) for roughly 87% of Indian goods due to “graduation” rules (where Indian products became too competitive).
- The Impact: Sectors like textiles, which enjoyed a 20% tariff discount, were suddenly hit with full duties.
- The Solution: The FTA would render the GSP irrelevant. While the GSP only offered partial discounts, the FTA is expected to bring customs duties on over 90% of Indian items to zero, providing much deeper market access.
Key Beneficiaries: Winners and Protected Sectors
The deal is a delicate balancing act, focusing on high-growth areas while shielding India’s sensitive rural economy.
| Sector | FTA Impact & Changes | Status |
| Textiles & Apparel | Tariffs of 10–12% expected to drop to 0%. | Major Winner |
| Luxury EVs | India likely to cut duties from 100% to 10–15%. | Mutual Gain |
| Wines & Spirits | Phased reduction of the current 150% duty. | EU Benefit |
| Dairy & Agriculture | Most sensitive items (like milk/wheat) are excluded. | Protected |
| Pharmaceuticals | Streamlined regulatory approvals and zero duties. | Growth Area |
Strategic Timing: Geopolitics & Diversification
The urgency to conclude the deal in January 2026 is driven by shifting global dynamics:
- US Tariff Shield: India is currently facing 50% tariffs on certain goods in the US. An EU deal allows Indian firms to “offset” these losses by diversifying into a €20 trillion market.
- CBAM Compliance: The EU’s Carbon Border Adjustment Mechanism (CBAM) began its tax phase on January 1, 2026. The FTA provides a framework for India to negotiate smoother “green trade” transitions.
- The “China Plus One” Pivot: As Europe reassesses its economic ties with China, India is positioning itself as the primary, reliable democratic partner for supply chain integration.
Financial Impact: A $150 Billion Opportunity
Bilateral trade currently stands at approximately $136.5 billion. Analysts at Jefferies and GTRI predict that the FTA could:
- Increase services exports by 3–5% annually.
- Boost labor-intensive manufacturing (textiles/leather), potentially creating millions of new jobs.
- Position India as a global manufacturing hub for luxury European brands looking to export back to the EU.
Conclusion: Final Hurdles Before Jan 27
While the “90% duty-free” figure is a breakthrough, negotiators are reportedly working through the final weekend of January to bridge differences on government procurement and digital trade rules. If the announcement is made on Tuesday, January 27, it will mark India’s 19th trade pact and arguably its most significant economic milestone since the 1991 reforms.
