New Delhi: India and the European Union are close to finalising a long-pending free trade agreement (FTA), a move that could make European cars and wine cheaper in India while opening up bigger markets in Europe for Indian products like textiles, jewellery, electronics and chemicals. Government sources from both India and the EU told Reuters that the deal could be announced on Tuesday, following Prime Minister Narendra Modi’s meeting with top European leaders during an India–EU summit scheduled between January 25 and 28. An Indian government source told the outlet that the announcement may come after PM Modi meets European Council President Antonio Costa and European Commission President Ursula von der Leyen, who will jointly chair the summit in India. Also Read - 'Mother Of All Deals': EU Chief Says They Stand On 'Cusp Of Historic Trade Deal' With IndiaAn EU official confirmed the intent, saying the bloc aims to “conclude negotiations on the free trade agreement” during the summit, before both sides begin their internal approval process. What Is a Free Trade Agreement?A free trade agreement is a deal between countries to reduce or remove taxes (called tariffs) on imported goods and make it easier for companies to do business across borders. For consumers, this often means lower prices and more choices. What Could Get Cheaper in India?One of the biggest changes could be lower import taxes on European cars and wine. Currently, India imposes very high taxes on imported vehicles, making brands like BMW, Volkswagen and Renault expensive. If tariffs are reduced under the deal, imported European cars could become more affordable. Lower duties would help European automakers expand in India, which is now the world’s third-largest car market. What Does India Gain?Indian exporters stand to benefit significantly. According to Indian officials, the deal would boost exports of:Textiles and garmentsJewelleryLeather goodsElectronicsChemicals and pharmaceuticalsBilateral trade between India and the EU already stands at $136.5 billion (FY25), making the EU one of India’s largest trading partners. If approved by the European Parliament, a process that could take at least a year, the deal could further expand this trade. Why Is This Deal Important Now?Trade talks were restarted in 2022 after a nine-year pause and gained urgency amid rising global trade tensions. In August 2025, US President Donald Trump doubled tariffs on Indian goods to as much as 50%, one of the highest rates globally.
