by Asad Mirza
India and the EU finalise a landmark FTA and security pact, cutting tariffs, boosting trade and investment, and signalling stability amid global protectionism and tensions.
In today’s fractured world, fissures caused mostly by the ongoing Trumpomania, every nation is working post haste to forge new alliances, particularly focused on trade. The best example of this is the India–EU partnership FTA, to be formalised on Tuesday (January 27). The enhanced partnership is going to eliminate tariffs on more than 90 per cent of traded goods, besides imparting a thrust to services and facilitating investments between the two sides.
For every nation today, guarding its trade interests to boost its own manufacturing sectors and the associated services sector is of paramount interest. Bogged down by non-business-like tariff impositions accompanied by various illogical concessions by the Trump administration, the global economy has faced a churn of its own, based on the imperatives of conducting trade on an equal footing with other nations.
Today is a day that will be remembered forever, marked indelibly in our shared history.
European Council President António Costa and European Commission President Ursula von der Leyen and I are delighted to announce the conclusion of the historic India-EU Free Trade Agreement.… pic.twitter.com/yaSlPm2b2L
— Narendra Modi (@narendramodi) January 27, 2026
This has not only gone against but also in favour of countries like India. India has been able to stitch together a Free Trade Agreement (FTA) with the European Union (EU) after 18-year-long parleys, which received an additional boost to reach a deal, particularly during the last year.
Today, i.e., Tuesday, January 27, India and the European Union will elevate their long-standing strategic engagement with the signing of a Security and Defence Partnership (SDP) at the 16th India–EU Summit.
India-EU Trade Parleys
The EU-India FTA conclusion marks the end of a two-decade-old process initiated in 2007. With bilateral trade already crossing $136 billion, this would be “one of the biggest” bilateral deals in the world.
The underlying urgency and interests shown by both sides to agree to an FTA were coherently expressed by EU Commission President Ursula von der Leyen when she said that India and the European Union are giving a “fractured world” an alternative.
While the FTA will be watched most closely in terms of bilateral gains for both countries, it is the timing of the Summit, amid unprecedented transatlantic tensions between the EU and the United States over territorial issues and trade, that is most significant.
Today, the world’s two largest democracies launched a Security and Defence Partnership.
A platform for stranger cooperation on the strategic issues that matter most
– from defence industry to maritime security.
This is what trusted partners do. https://t.co/b4aLfWohLW
— Ursula von der Leyen (@vonderleyen) January 27, 2026
“India and Europe have made a clear choice… strategic partnership, dialogue and openness,” said Ms von der Leyen in a social media post. “We are showing a fractured world that another way is possible,” she added.
European Council President António Costa has said that, “In our multipolar world, it’s essential that the EU and India become closer and closer partners because we can together be strong providers of stability, predictability and reliability in international relations, and protect our international rules-based order.”
“Our trade agreement, I think, is a very important geopolitical stabiliser and a showcase of how it’s possible to protect international rules-based trade,” Costa, who traces his roots to Goa, said against the backdrop of the turmoil created by US trade policies.
India-EU Trade
The EU is India’s largest trading partner bloc, accounting for trade in goods worth €120 billion in 2024, or 11.5 per cent of India’s total trade. In 2023, trade in services was worth €59.7 billion. The EU’s share of FDI in India touched €140.1 billion in 2023, up from €82.3 billion in 2019.
Once the FTA is signed and ratified by the European Parliament, a process that could take at least a year, the agreement could expand bilateral trade and lift Indian exports such as textiles and jewellery, hit by 50% US tariffs since last August.
For the EU, which has signed a new security and defence partnership and a free trade agreement with New Delhi, India will provide heft to the 27-nation European bloc on multiple fronts. The security and defence pact will lead to strengthening cooperation in areas such as maritime security, counter-terrorism, cyber-defence, and maritime domain awareness, with a focus on stability in the Indo-Pacific region.
Analysts say the India-EU defence and security partnership would place New Delhi within a framework that the 27-nation European bloc has so far extended to Japan and South Korea. It would provide an institutional platform for advancing security cooperation at a moment when both sides are reassessing their long-term security and defence priorities.
Moreover, a shift in the geopolitical situation, combined with Trump’s unpredictable behaviour, has compelled the EU to change its outlook towards India. Instead of maintaining a buyer–seller relationship largely dominated by France and Germany, EU–India engagement will now evolve into a structured industrial partnership with long-term implications.
With the signing of the long-negotiated FTA, the EU will benefit from gaining deeper access to India’s huge market, diversifying supply chains, and expanding services exports. More than this, it could ultimately result in the EU decoupling itself from the US and other unreliable partners such as China.
For India, the FTA will provide a much-needed opportunity to restore the Generalised System of Preferences (GSP), which removes import duties from products coming into the EU market from developing nations. India’s garment, pharmaceutical and steel industries, in addition to petroleum products and machinery, will see a rise in exports to the EU market.
It is estimated that two-way trade under the FTA could rise to $200–250 billion in goods and services within a decade, building on current figures of $137 billion in goods and $50 billion in services.
Today marks a historic moment as we open a new chapter in EU-India relations – on trade, security, and people-to-people ties.
Our Summit sends a clear message: in a reshaping global order, the EU and India stand together as strategic, reliable partners. https://t.co/Dvn3yggfHn
— António Costa (@eucopresident) January 27, 2026
The US Reaction
As European Council President Costa described the India–EU FTA as an “important political message to the world that India and the EU believe more in trade agreements than in tariffs,” at a time when protectionism is rising and “some countries have decided to increase tariffs,” a typical US response followed.
The US doubled down on allegations that India’s oil trade with Russia finances the war in EU-backed Ukraine.
“We have put 25 per cent tariffs on India for buying Russian oil. Guess what happened last week? The Europeans signed a trade deal with India,” US Treasury Secretary Scott Bessent said in an interview on Sunday.
Indian Economic Diplomacy
With the latest deal firmed up, Indian trade negotiators and diplomats are focusing on increasing trade relations and signing new FTAs with countries like Canada. Last week, Canada’s International Trade Minister Maninder Sidhu called for expanded trade with India as the two countries prepare to start trade negotiations. Canadian Prime Minister Mike Carney is expected to visit India in March 2026 to finalise a new deal.
Meanwhile, last week, Premier David Eby of British Columbia, Canada’s western province, led a delegation to India concentrating on business and technological cooperation rather than getting trapped in politics, ensuring that the standard of living of its people is not impacted by the US trade war.
David Eby and his team advanced key partnerships with government and business leaders in Bengaluru, Karnataka, India’s largest innovation centre, to attract investment, foster collaboration in innovation, and build long-term relationships.
Nonetheless, the trade deal between India and the EU has redefined not just ties between the two sides but also global economic alignments, especially when the traditional architecture of commerce and trade is facing serious challenges. India has also shown that it has various options besides the US and that ideological underpinnings do not weigh heavily when it comes to its trade interests.
(The writer is a New Delhi-based senior commentator on national, international, defence and strategic affairs, environmental issues, an interfaith practitioner, and a media consultant. Ideas are personal.)
