India and the European Union have finalised a landmark Free Trade Agreement (FTA) after nearly two decades of negotiations, Prime Minister Narendra Modi announced on January 27, 2026. The pact — being called the “mother of all deals” — represents an economic arrangement that covers about 25% of global GDP and one-third of global trade.
PM Modi said the agreement will give a major boost to India’s manufacturing sector and significantly expand opportunities in the services sector, adding that it will strengthen economic confidence for investors and producers on both sides.
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Economic Impact and Strategic Benefits
Officials and analysts have highlighted several key expected benefits:
Manufacturing Growth: The deal is expected to significantly enhance India’s manufacturing output by opening access to the 27-member EU market, especially in sectors like machinery, textiles, leather goods, and automotive components.
Services Expansion: India’s services sector — particularly IT, financial services, and business outsourcing — is likely to gain broader market access across Europe, helping boost exports and employment.
Investor Confidence: The pact is anticipated to draw greater foreign investment flows into India, as a large and stable economic bloc signs a comprehensive trade framework with the country.The deal is slated for formal signing after routine legal vetting — likely over the next few months — and could be implemented within a year.
Diplomatic Significance and Global Context
Leaders on both sides have described the agreement as emblematic of deepening strategic and economic cooperation between two major global economies. PM Modi emphasized it as a “perfect example of partnership between two major economies,” reinforcing bilateral ties that go beyond trade.
The conclusion of this FTA comes at a time when many nations are reevaluating trade alliances amid global economic uncertainties and shifting tariff regimes — particularly tensions related to U.S. trade policies.
Implementation and Next Steps
Legal Process: Before coming into force, the agreement must complete legal finalisation in India and approval from the EU institutions.
Tariff Reductions: Preliminary reports suggest future tariff cuts on key categories — including automobiles and other industrial products — to boost two-way trade, though sensitive sectors like dairy and certain agriculture products may be protected to safeguard domestic interests.
Broader Trade Landscape
This agreement follows other significant trade arrangements India has pursued in recent years, including pacts with the European Free Trade Association (EFTA) and the United Kingdom. Together, these moves align with India’s broader strategy to strengthen trade alliances and diversify export markets amid a changing global economy.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
