Published On: July 12, 2026
Authored By: Khushi Sharma
IIMT University, Meerut
Abstract
India and the European Union concluded negotiations for a Free Trade Agreement (FTA) in January 2026, a landmark deal described as “the mother of all deals.” The partnership between India and the EU covers 20 of the 24 negotiating chapters and is designed to create a free market spanning nearly two billion people across India and the EU combined, together representing roughly 25% of the world’s gross domestic product. The FTA aims to liberalise trade in goods and services, deepen regulatory cooperation, and promote sustainability. Its major components include the removal of import duties on industrial products, chemicals, and pharmaceuticals, along with preferential access for Indian agricultural and processed food products. It also establishes a parallel framework for the mobility of skilled professionals, researchers, and students. Several complex issues, however, still remain to be addressed or negotiated.
While the FTA covers close to 90% of trade, a separate Investment Protection Agreement remains delayed, complicated by India’s 2015 Bilateral Investment Treaty (BIT) reforms and the requirement of unanimous ratification by all 27 EU member states. The EU’s Carbon Border Adjustment Mechanism (CBAM) is viewed by India as a trade barrier, and strict Sanitary and Phytosanitary (SPS) measures have led to the rejection of a significant share of Indian agricultural exports. Data adequacy is a further hurdle, since India currently lacks “General Data Protection Regulation” (GDPR) adequacy status. The primary focus going forward is to harmonise these frameworks and resolve cross-border disputes through joint arbitration and shared learning, with implementation expected to be formalised by early 2027.
Key Words: Negotiations, Trade Agreement, Transnational, International Arbitration
Background
Negotiations for the trade agreement began in 2007 between India and the European Union under the Broad-Based Trade and Investment Agreement framework. Talks stalled due to disagreements over intellectual property rights, tariffs, and market access between the two sides. Negotiations were officially relaunched in 2022 following new strategic and economic cooperation between India and the EU.
The relaunched talks covered multiple areas, including trade in goods, intellectual property rights, sustainable development, digital trade, and dispute settlement.
In February 2025, Prime Minister Narendra Modi and European Commission President Ursula von der Leyen agreed to complete negotiations by the end of the year.
European Commission President Ursula von der Leyen and Indian Commerce and Industry Minister Piyush Goyal described the agreement as the “mother of all deals” in January 2026.
Von der Leyen said the agreement would create a free market for 2 billion people, representing roughly one-fourth of global GDP.
As of January 2026, the agreement had been settled on 20 of the 24 negotiating chapters.
The agreement was announced at the India-EU Summit held at Hyderabad House on 27 January 2026.
Prime Minister Narendra Modi described it as a “big agreement” between India and the EU, the “mother of all deals.”
He said the agreement would create opportunities for India’s 1.4 billion people and millions of people across Europe.
Provisions Covered Under the India-EU Agreement
The India-EU FTA establishes a framework to liberalise trade in goods and services, ease investment, and strengthen regulatory and sustainability cooperation.
The table below summarises the areas and provisions covered under the FTA:
| Area Covered | Provisions Reported |
|---|---|
| Trade in Goods / Industrial Products | Tariffs on the majority of goods will be reduced or eliminated based on trade value, with exclusions and safeguards for sensitive sectors. High tariffs on select automobiles, chemicals, and pharmaceuticals will be phased out gradually. |
| Agriculture | Preferential access will be given to select agricultural and processed food products, while dairy, cereals, and other sensitive items remain excluded. |
| Mobility of Labour | A parallel framework will be established for the mobility of skilled professionals, researchers, and students. |
| Sustainability | Provisions will address environmental standards and climate-related regulatory issues. |
| Trade Facilitation | Measures will improve regulatory transparency, customs procedures, and rules of origin. |
Ratification and Implementation
The agreement will undergo formal legal review and translation before signing. It requires approval by the Council of the EU through a qualified majority vote, consent from the European Parliament, and completion of India’s domestic approval process before it can enter into force. The agreement is expected to come into force by early 2027.
Benefits to India from the EU
1. Reduction in Tariffs: The EU has reduced tariffs on close to 97% of Indian exports, an estimated saving of €4 billion annually for Indian exporters.
2. Export Target: India’s exports are expected to double by 2032 as a result of the deal.
3. Automobile Sector: Import duty on cars imported from Europe to India will be reduced from 110% to 10%, subject to an annual quota of 250,000 units, with the steepest reductions applying to cars priced above €15,000.
4. Other Goods: Import duty on spirits will be reduced to 40%, while tariffs on vegetables, olive oil, fruit juices, processed foods, medical equipment, and items such as spacecraft components will be eliminated entirely.
Benefits to the EU from India
1. Textile and Manufacturing: India’s textile, leather, and footwear sectors are expected to grow, as the removal of tariffs ranging from 12% to 17% will allow Indian exporters to compete on more equal terms with Bangladesh, Vietnam, and Turkey in the European market.
2. Export Potential: India’s textile exports are projected to grow from $30 billion to $40 billion, according to Union Minister of Commerce and Industry Piyush Goyal.
3. Chemicals and Machinery: High tariffs will be removed on machinery (44%), chemicals (22%), and pharmaceuticals (11%).
The Missing Piece in the India-EU Free Trade Agreement
Although the FTA negotiations have concluded, a separate Investment Protection Agreement has yet to be finalised. The India-EU Free Trade Agreement, concluded in January 2026, marks a turning point in global trade, covering an estimated 25% of global GDP. While tariff liberalisation on over 90% of goods has been successfully agreed, intellectual property and dispute settlement remain the most complex areas of the deal, and non-tariff and regulatory barriers continue to generate transnational disputes.
The Investment Protection Agreement aims to give investors a “predictable and secure investment environment” through commitments on:
• Non-discrimination
• Preservation of the right to regulate, alongside protection of investors and their investments against expropriation without compensation and against unfair treatment
• Free transfer and repatriation of returns
Both sides still need to agree on a dispute settlement mechanism to enforce these commitments. Negotiations have been slowed by India’s ongoing Bilateral Investment Treaty (BIT) reforms and by the EU’s requirement of ratification by all 27 member states.
As discussed in Arbitration Insights, Episode 3: India terminated around 70 existing BITs in 2015 in response to a wave of investor-state claims, signalling major reforms intended to reshape its bilateral treaty relationships. India adopted a new Model BIT in 2015–16. The 2015 Model BIT drew significant criticism for adopting a narrow definition of investment, including a restrictive fair and equitable treatment (FET) provision, and excluding Most Favoured Nation (MFN) clauses.
By renewing its approach to bilateral investment treaties in 2025, India has committed to “encourage sustained foreign investment,” though it remains too early to determine what the new equilibrium will look like. It is also worth noting that the India-European Free Trade Association Trade and Economic Partnership Agreement (India-EFTA TEPA), effective from October 2025, does not contain investment protection features such as an investor-state dispute settlement (ISDS) mechanism.
Other Transnational Disputes in the India-EU FTA
A. Carbon Border Adjustment Mechanism
The dispute centres on the EU’s carbon tax, under which import duties are imposed on carbon-intensive goods such as steel, aluminium, and cement.
India’s stance: The compliance and verification burden is especially high for Indian exporters, particularly MSMEs. India views CBAM as a trade barrier that negatively affects industrial growth and global competitiveness. Because CBAM falls outside the scope of the FTA itself, it remains a persistent source of tension between the two sides.
B. Sanitary and Phytosanitary (SPS) Measures (Agriculture/Marine)
The EU’s food safety and health standards are especially strict. Indian products such as rice, spices, tea, and shrimp have faced rejection over pesticide residue and antibiotic traces.
India’s stance: India has described these strict standards as “technical barriers to trade” that restrict market access for its agricultural exports.
C. Data Adequacy and Mobility
Data issues: India does not hold “General Data Protection Regulation” (GDPR) adequacy status under the EU, which increases the compliance burden for Indian IT companies.
Work permits: Individual EU member states, such as Germany and France, maintain their own, often restrictive, immigration policies, which can affect the mobility of Indian professionals even where fast-track work permits exist.
Exploring the Arbitration Landscape (India v. EU)
India and the EU share a common goal of promoting efficiency in dispute resolution, though their approaches to arbitration law differ in some respects.
India’s Arbitration Law
India has aligned its arbitration law with international standards through the Arbitration and Conciliation (Amendment) Act, 2015. Landmark cases such as Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. have clarified the distinction between different stages of the arbitration process.
The EU’s Arbitration Law
EU arbitration law shares some similarities with India’s framework but also has distinctive features. One key difference is that domestic arbitration within the EU is governed by the laws of individual member states rather than a single EU-wide framework. In the EU, the principle of the “right to be heard” significantly limits the application of the doctrine iura novit arbiter — “the arbitrator knows the law.”
Mutual Learning
Cross-fertilisation of ideas and collaborative efforts can strengthen arbitration frameworks in both regions. The EU’s emphasis on the “right to be heard” strikes a balance between fairness and party autonomy — an approach India could draw on. India’s approach to promoting international arbitration and aligning its law with global best practices could similarly benefit the EU.
Conclusion
The conclusion of the India-EU Free Trade Agreement in January 2026 marks a turning point in global economic relations. The finalisation of this long-term commitment demonstrates the resolve of both parties — two of the world’s largest democracies — to strengthen their economic relationship through the liberalisation of trade across a larger market. India’s export capacity in sectors such as textiles, leather, and footwear stands to benefit significantly from this partnership, alongside rapid growth and greater access in the automotive and machinery industries.
Yet a fully developed Economic Partnership Agreement — dubbed “the mother of all deals” — cannot be considered complete without a separate Investment Protection Agreement. As discussed above, differing legal approaches to dispute resolution and investor protection, along with regulatory hurdles such as the EU’s CBAM, highlight the complexity of bringing two distinct economic systems together.
Ultimately, the success of this partnership will depend on both parties balancing their respective objectives over the coming years — India through its treaty reform process, and the EU through its regulatory and sustainability criteria — so that each side can achieve its own goals.
The future of this agreement will ultimately depend on how effectively both countries capitalise on mutual learning. By combining India’s drive for international arbitration standards with the EU’s emphasis on the “right to be heard,” the two sides can build an investment climate that is more stable and predictable than it is today. While the agreement is expected to come into force in early 2027, its real success will depend on how freely goods, capital, and people move between the two regions once it takes effect — with projections suggesting the deal alone could double India’s exports by 2032.
