India and EU Conclude Historic Free Trade Agreement: Key Takeaways for Trade and Defence

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India and the European Union officially finished their talks for an India-EU Free Trade Agreement (FTA) today. Prime Minister Narendra Modi and EU leader Ursula von der Leyen met in New Delhi to sign the pact. This deal covers 25% of the world's economy. It will remove taxes on 97% of goods traded between the two regions.

This is great news for Indian exporters of clothes, shoes, and jewelry. It also helps European companies sell cars and electronics in India more easily. This agreement is a major win for both sides after many years of trade discussions.

A New Chapter for Business and Security

The India-EU Free Trade Agreement ends nearly 20 years of waiting. Before this, high taxes made it expensive for India to sell goods to Europe. For example, Indian clothing often faced taxes as high as 16%. Now, those costs will drop toward zero. This deal also includes a new partnership for defense and technology. Indian companies will now be able to work on European defense projects for the first time.

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Most experts believe the new rules will fully start by early 2027. This timing is very important for India as it gives Indian factories a steady way to grow while trade with other countries remains uncertain.

How will the India-EU Free Trade Agreement bridge the 2026 "GSP Gap"?

The EU stopped a special program called the GSP for India on 1 January. The program used to provide Indian businesses with lower taxes on exports. Now, those businesses must pay full taxes until the new FTA starts in 2027. This creates a one-year gap where costs will be higher for small business owners. 

What does this mean for you?

  • Higher Costs for Now: Small businesses selling clothes or machines will face higher taxes for the rest of this year. They will need to manage their budgets carefully until the FTA relief begins.
  • Green Rules: The EU is also starting a "carbon tax" on steel and aluminum. Indian factories must now report their carbon emissions to avoid extra fees.
  • Easier Travel: To help right away, the deal makes travel easier. It creates a "fast track" for visas. This helps IT workers and engineers get to Europe much faster than before.
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The India-EU FTA is a shield for the future. By 2027, trade between India and Europe could double in size. For shoppers, this means European luxury goods and high-tech gadgets will eventually cost less. For workers, it means more jobs in factories and tech hubs. Overall, this deal marks the start of a much closer relationship between India and the European continent.