January 28, 2026
India and the European Union concluded a “historic” free trade agreement, the largest of its kind, and aims to establish a joint trade area that includes two billion consumers. The President of the European Commission, Ursula von der Leyen, announced on the “X” platform that the two parties “made history” with this long-awaited agreement after negotiations that lasted nearly two decades.
This agreement comes in light of a delicate geopolitical situation, as the two parties seek to establish an economic wall in the face of the escalation of Chinese influence and the effects of trade disputes between Washington and Beijing. Under this agreement, customs duties will be reduced on 99.5% of Indian exports to Europe, while duties on 96.6% of European imports to India will be reduced or eliminated, saving Brussels approximately 4 billion euros annually.
Winners: Textiles, medicines and jewellery
Economic reports (Bloomberg) expected that the agreement would lead to prosperity in some Indian sectors as a result of reducing fees to “zero.” Among the most prominent beneficiaries are:
-The clothing and textile sector: India got a direct opportunity to enter a huge European market valued at $263 billion, with expectations of increasing its market share to 9%.
-Gemstones and jewelry: The volume of trade in this sector is expected to double, reaching about $10 billion within 3 years.
Food industries: Exporters of seafood, tea, coffee and spices will benefit from great facilities to enter the European market.
Losers: Challenges for cars and local drinks
In contrast, the agreement imposes significant competitive challenges on some industries in India:
-Automotive industry: India will allow the entry of 250,000 European cars with preferential fees that will gradually decrease from 110% to 10%, in addition to canceling fees on spare parts in the future.
-Alcoholic beverages: Indian producers will face strong competition after duties on European wines and beverages were reduced from 150% to levels ranging between 20% and 40%.
The Indian Stock Exchange reacted positively to this news, with shares of textile companies (such as “Kitex Garments” rising by 9.1%) and shrimp export companies, amid optimism about the ability of this “ambitious agreement” to change the dynamics of price determination and the prospects for economic growth in India in the coming years.
(Bloomberg + Al Jazeera)
