Executive Summary
In January 2026, after nearly two decades of negotiations, the European Union and India concluded the EU-India Free Trade Agreement (FTA) — hailed by leaders as the “mother of all deals”. This historic pact opens markets representing nearly 2 billion consumers, significantly liberalising trade in goods, services, and establishing frameworks for regulatory cooperation and mobility. It is expected to double EU exports to India by 2032 and cut around €4 billion in tariffs annually.
Simultaneously, the EU and India signed a first-ever Security and Defence Partnership, institutionalising cooperation on maritime security, cyber defence, counter-terrorism, and defence industrial collaboration.
From a German perspective, these parallel agreements present enormous strategic and economic benefits across industry sectors — from automobiles and machinery to defence manufacturing and digital cooperation — while strengthening geopolitical ties in a multipolar world.
I. The EU-India Free Trade Agreement (FTA): Strategic and Economic Dimensions
The EU-IndiaFTA stands out for its comprehensiveness and scale, covering trade in goods and services, investment, regulatory cooperation, and frameworks to support small and medium-sized enterprises (SMEs).
1. Trade Liberalisation and Market Access
Tariff Reductions: The agreement eliminates tariffs on 96.6 % of EU goods exported to India, covering machinery, pharmaceuticals, chemicals, and industrial equipment — sectors where Germany has strong export capabilities.
Automotive Sector: Import duties on European cars, previously as high as 110 %, will be gradually reduced to as low as 10 %, with generous quotas (e.g., up to 250,000 vehicles annually under preferential terms).
Services and Investment: The pact enhances market access for services such as financial, maritime, and professional services, and provides a more predictable investment environment.
Regulatory Cooperation and SMEs: Streamlined customs procedures and dedicated SME support (including contact points for ease of market entry) reduce barriers for German mid-sized companies seeking to export or invest in India
II. The EU–India Security & Defence Partnership: Strategic Relevance
At the 16th EU–India Summit, the two partners formalised a Security and Defence Partnership that creates a structured framework for cooperation on peace, security, and shared defence challenges.
Core Areas of Cooperation
- Maritime Security: Building on anti-piracy operations and naval engagements, joint cooperation enhances safety of sea lanes crucial for global trade — a matter of acute importance for German exports.
- Cyber and Emerging Threats: Integrated approaches to cybersecurity, hybrid threats, and intelligence support resilience for German businesses operating in both regions.
- Defence Industry Collaboration: The partnership paves the way for industrial cooperation — including joint development, technology exchange, and potential supply-chain integration for defence manufacturing.
This represents a shift from earlier dialogue-level cooperation to institutionalised strategic engagement, reflecting shared concerns about global instability and the need for diversified security partnerships.
III. Benefits to the German Economy from the EU-India FTA
For Germany, Europe’s largest economy and a highly export-oriented industrial power, the FTA offers clear benefits across multiple sectors.
1. Automotive Sector Expansion
German automotive manufacturers — including Volkswagen, BMW, and Mercedes-Benz — have already welcomed the trade deal as a significant opportunity for expanded market access in India. Reduced tariffs improve the competitiveness of German-built vehicles and offer a pathway to scaling exports in a rapidly growing automobile market. Reuters reported that high-end European cars will see tariffs reduced markedly, facilitating access for luxury German brands.
In 2024, German automotive exports to India exceeded €1 billion, illustrating the existing basis for further expansion under the FTA.
2. Machinery, Equipment, and Capital Goods
Germany’s global leadership in machinery and industrial systems puts it in an excellent position to benefit from tariff elimination on industrial products. The FTA eliminates or significantly reduces historically high duties on machinery and equipment, enabling German exports to become more price-competitive.
Reduced non-tariff barriers and streamlined customs procedures will especially benefit German manufacturers supplying precision tools, engineering solutions, and industrial automation technologies.
3. Chemicals, Pharmaceuticals, and High-Tech Exports
Germany’s chemical and pharmaceutical clusters — among the most advanced globally — will benefit from increased market access and stronger intellectual property protections embedded in the agreement.
Importantly, Germany’s strong position in medical devices and health-tech can thrive in the Indian market with regulatory certainty and reduced duties facilitating competitive entry.
4. SMEs and Mittelstand Growth
The dedicated SME provisions in the FTA reduce informational asymmetries and help German mittel-sized firms navigate the Indian market. These firms — often world leaders in niche engineering fields — can gain from enhanced access, supply chain linkages, and reduced regulatory friction.
5. Services and Digital Economy Opportunities
German firms with expertise in financial services, logistics, engineering consultancy, and ICT solutions stand to gain from a predictable services landscape, enabling cross-border contracts and collaborations with Indian enterprises and institutions.
6. Supply Chain Resilience
By integrating India into EU supply chains more deeply, German manufacturers reduce dependence on a limited set of nations for high-tech inputs. German customers can source competitively priced components and systems from India, enhancing resilience and cost efficiency in cross-continental production networks.
IV. Defence and Security: German Strategic and Economic Advantages
The EU–India Security and Defence Partnership provides a framework for industrial cooperation in defence, which aligns with developing German capabilities and strategic interests.
1. Defence Industrial Cooperation and Exports
Under this partnership, German defence manufacturers such as Rheinmetall, Thyssenkrupp Marine Systems, and others can pursue co-production, joint R&D, and technology transfer projects in India — one of the world’s fastest-expanding defence markets. Joint frameworks and structured dialogues reduce uncertainty and facilitate long-term planning for such collaborations.
India’s defence market, historically reliant on a limited set of suppliers, is diversifying. This partnership enables German firms to compete on technology and quality in areas such as naval systems, aerospace components, and cybersecurity solutions.
2. Maritime and Cyber Security Contributions
Collaborative maritime security — including shared patrols and safeguarding of trade routes — aligns with German strategic interests given the heavy reliance of German exports on secure maritime corridors. The Indo-Pacific is a critical node in global logistics, and cooperative security enhances stability essential for trade.
Cybersecurity cooperation under the partnership supports German digital infrastructure companies and helps protect multinational supply chains from emerging threats.
3. Technology Collaboration and Innovation Ecosystems
Emerging technology cooperation — including in space, AI, and hybrid threats — positions German defence and tech firms at the centre of international innovation ecosystems. Shared R&D platforms and potential joint ventures or forums undercut geopolitical barriers to technology collaboration.
V. Strategic and Geopolitical Significance for Germany
Beyond pure economics, the India–EU agreements bolster Germany’s geopolitical stature as it navigates a more contested global environment characterized by protectionism and geopolitical flux. The deal diversifies Germany’s trade dependencies beyond North America and China, supporting a resilient export strategy.
The integrated approach — blending trade, security, and mobility — enhances people-to-people ties (e.g., skilled talent mobility frameworks with India) and supports long-term linkages in higher education, research, and innovation.
VI. Conclusion
The India–EU Free Trade Agreement and Security & Defence Partnership represent transformative milestones in global economic and strategic cooperation. From Berlin’s perspective, these agreements offer:
- Expanded market access for German exports across automobiles, machinery, chemicals, and services;
- Enhanced competitiveness for German SMEs in dynamic markets;
- Strategic defence collaboration creating new industrial opportunities;
- Supply chain resilience and diversification; and
- Shared strategic interests in securing global trade and technology ecosystems.
These developments position Germany and India as natural strategic partners, enhancing economic prosperity, supporting jobs, and strengthening shared democratic values in an increasingly multipolar world.
References
Free Trade Agreement
- EU-India Free Trade Agreement Factsheet: Main benefits – European Commission (policy.trade.ec.europa.eu)
EEAS Press Release – EU and India conclude landmark FTA – European External Action Service
Chapter by Chapter Summary – EU Trade Policy MEMO
Wikipedia – India–European Union Free Trade Agreement
Reuters: German carmaker CEOs laud trade deal
The Guardian: ‘Mother of all deals’
Security & Defence Partnership
India–European Union relations – Wikipedia
EEAS – EU and India sign security & defence partnership
StratNewsGlobal: Security & Defence Partnership details
Image credit: X handle of Narendra Modi
