India and EU forge biggest trade agreement

India and the European Union signed a landmark free trade agreement, described as the “mother of all deals,” aiming to create a market of two billion people. The pact will cut tariffs on most goods, boost key sectors, and deepen strategic cooperation, alongside defence and mobility agreements

New Delhi: India and the European Union on Tuesday sealed a landmark free trade agreement— billed as the “mother of all deals” — to create a market of two billion people with Prime Minister Narendra Modi and the top EU leadership unveiling a transformative agenda to leverage trade and defence in protecting the rules-based world order.

The two sides also inked two crucial pacts — one on security and defence collaboration and another on mobility of Indian talents to Europe — after Prime Minister Modi hosted EU leaders Ursula von der Leyen and Antonio Costa for summit talks amid frosty ties with the US.

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The free trade agreement that will account for almost a quarter of the global GDP will reduce tariffs on 99 per cent of Indian exports to the EU and cut duties on over 97 per cent of the EU’s exports to India, according to officials.

The EU estimated that the deal will cut up to four billion euros in annual tariffs for European exporters.

Indian sectors such as textiles, apparel, leather goods, handicrafts, footwear and marine products are set to gain from the FTA, while Europe is set to benefit in areas of wine, automobiles, chemicals and pharmaceuticals, among others.

Under the provisions of the pact, the EU’s wine exports will benefit significantly as the current duties of 150 per cent will see a sharp cut and the new levies will be in the range of 20 per cent to 30 per cent.

In line with their vision for a rules-based global order, India and the 27-nation bloc also rolled out a joint comprehensive strategic agenda for the next five years and firmed up a total of 13 pacts including one on the conclusion of negotiations for the FTA.

In his remarks, Modi said the global order is undergoing “profound turbulence” and, in such a context, the partnership between India and the EU will strengthen stability in the international system.

“Today, India has concluded the largest free trade agreement in its history. It is a happy coincidence that on the 27th day of the month, India is entering into this FTA with the 27 member states of the European Union,” he said.

“This historic agreement will facilitate easier access for our farmers and small enterprises to European markets, create new opportunities in manufacturing, and further strengthen cooperation across our services sectors,” Modi said in his media statement.

Focus on innovation

The Prime Minister said the FTA will boost investment, foster new innovation and strengthen supply chains at the global level. “In other words, this is not merely a trade agreement; it is a new blueprint for shared prosperity.” The finalisation of the trade deal came nearly two decades after the two sides began negotiations on it. It may take at least six months to formally sign the deal as it will require legal scrubbing by both sides.

“We do hope that we should be able to celebrate the entry into force of this agreement within the calendar year 2026,” Commerce Minister Piyush Goyal said at a media briefing.

Hailing the mega trade deal, European Commission President von der Leyen said the India-EU partnership will send a strong message that cooperation is the best answer to global challenges, in remarks that came amid growing strain in ties between Europe and the US.

“We did it. We delivered the mother of all deals. We are creating a market of two billion people,” she said.

“And this is the tale of two giants, the world’s second and fourth largest economies, two giants who choose partnership in a true win-win fashion, a strong message that cooperation is the best answer to global challenges,” she said.

Von der Leyen said the trade deal will cut up to 4 billion euros in annual tariffs for European exporters of all sizes and it will create jobs for millions of workers both in India and Europe.

Largest trading partner

The EU, as a bloc, is India’s largest trading partner in goods. For the financial year 2024-25, India’s total trade in goods with the EU was worth about USD 136 billion, with exports around USD 76 billion and imports at USD 60 billion.

“It (FTA) brings together Indian skills, services and scale with Europe’s technology, capital and innovation. It will create levels of growth that neither side can achieve alone,” Von der Leyen said.

“And by combining these strengths, we reduce strategic dependencies at a time when trade is increasingly weaponised,” she said in an apparent reference to the Trump administration’s policies on trade and tariffs.

Von der Leyen, referring to the defence partnership pact, said Europe and India have chosen to be reliable partners to one another.

“We are not only making our economies stronger, we are also delivering security for our people in an increasingly insecure world. And today, the world’s two largest economies and democracies launched their first-ever security and defence partnership,” she said.

“This is a landmark departure and a trust-based platform for cooperation on the strategic issues that matter most. In doing so, we will help to build each other’s resilience,” she added.

It is widely believed that the frosty ties that India and Europe have experienced with the Trump administration resulted in a new urgency to conclude the FTA.

In his remarks, European Council President Costa said the key agreements signed between the two sides will reinforce the rules-based global order.

“Trade agreements reinforce rules-based economic order and promote shared prosperity. That’s why today’s free trade agreement is of historic importance — one of the most ambitious agreements ever concluded, creating a market of two billion,” he said.

In a multi-polar world, Costa added, the European Union and India are working together to grow spheres of shared prosperity.

“But prosperity does not exist without security. We will strengthen our cooperation to better protect our citizens and our shared interests, working together to counter the full range of security threats we face in the Indo-Pacific, in Europe and around the world, reaching a new level of strategic trust between us,” he said.

In his comments, Modi said the India-EU comprehensive strategic agenda will provide a “clear direction” and advance shared prosperity by accelerating innovation, strengthening security cooperation, and deepening people-to-people ties.

“India and the European Union’s cooperation is a partnership for global good. We will expand trilateral projects from the Indo-Pacific to the Caribbean,” he said.

“Together, we will establish the IMEC corridor as a key link between global trade and sustainable development,” he said.

Modi said both sides discussed in detail a number of global issues, including the situation in Ukraine, West Asia, and the Indo-Pacific. ” “Multilateralism and respect for international norms are our shared priorities. We are unanimous that reform of global institutions is essential to address today’s challenges,” he said.

The European Council president also reiterated Europe’s long-held position on Ukraine.

“Peace will not come out of a clash of arms, but out of justice lived and done by unarmed nations in the face of odds.” “Our summit reaffirmed our commitment to supporting efforts towards a comprehensive, just and lasting peace in Ukraine, one that fully respects Ukraine’s independence, sovereignty and territorial integrity,” he said.

“This is a key moment. We are supporting all efforts to reach a just and sustainable peace. Ukraine has shown its readiness, including at the cost of difficult compromise,” he said.

Costa said Europe is also counting on PM Modi to help in creating conditions for peace through dialogue and diplomacy.

“Together, we must show leadership on global issues. Cooperation between the European Union and India will help shape a more balanced, resilient and inclusive global order,” he said.

Foreign Secretary Vikram Misri said the outcomes reached at the summit are “deeply strategic in nature” and each of them has specific significance in the overall scheme of things.

“As the world’s second and fourth largest markets, India and the EU also have very high stakes on all critical global challenges of the day, including over-dependence and the concentration of global manufacturing and supply chains to a limited set of geographies,” he said.

Without naming any country, Misri also flagged concerns over growing protectionist tendencies in different parts of the world. “And therefore, as two large globalistic democracies and open market economies, our leaders have resolved to take this very strategic partnership forward for mutual benefit and for the greater good of the global population,” he said.

Hours after the summit, PM Modi said the FTA will “deepen economic ties, create opportunities for our people, and strengthen the partnership between India and Europe for a successful future.