India and the EU have finalized a historic free trade agreement, which European Commission President Ursula von der Leyen hailed as the “mother of all deals”.
The agreement comes after almost two decades of on-and-off negotiations between India and the EU, which accelerated significantly over the past six months and were finally concluded on Monday evening.
The deal is expected to open India’s vast, traditionally closely guarded market to the bloc’s 27 countries, with a focus on manufacturing and services. It will facilitate market access for key European products, including automobiles and wine, in exchange for easier exports of textiles, precious stones and pharmaceuticals.
The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs on 96.6% of goods traded by value, and would result in savings of €4bn (£3.5bn) in tariffs for European businesses, the EU said.
Tariffs will be reduced to zero on a wide range of industrial products, including almost all steel products, plastics, chemicals, machinery and pharmaceuticals.
“Europe and India are making history today,” von der Leyen said after landing in Delhi, where she met Indian Prime Minister Narendra Modi on Tuesday. “We have concluded the greatest agreement of all. We have created a free trade zone for 2 billion people, from which both sides should benefit.”
Von der Leyen previously said she expected exports to India to double after the deal, with the EU benefiting from unprecedented access to the previously heavily protected Indian market.
The agreement must be ratified by EU member states, the European Parliament and the Indian government before entering into force.
The trade deal is one of a series of agreements announced at a summit on Tuesday, as the EU and India grapple with Donald Trump’s tariffs, China’s economic clout and Russia’s invasion of Ukraine. The two sides are expected to sign a security pact to deepen their joint work on maritime security, hybrid threats and counter-terrorism.
The security deal was described by the EU as a way to “advance alignment” after concerns over India’s ties with Russia.
The two sides also reached an agreement on labor mobility to open up opportunities for young professionals and seasonal workers, while committing to launch negotiations on India’s integration into the EU’s Horizon research programme.
India, the world’s most populous country with 1.4 billion people, is also one of the world’s fastest growing economies and is on track to become the fourth largest economy this year, according to the International Monetary Fund.
Modi called Tuesday’s agreement “the biggest free trade deal in history.”
“This agreement has brought enormous opportunities to 1.4 billion Indians and millions of people in European countries,” he said. “It has become a wonderful example of synergy between two of the world’s largest economies.”
The agreement will lead Delhi to reduce customs duties on cars from 110% to 10% over five years, according to an EU statement, which will benefit European carmakers such as Volkswagen, Renault, Mercedes-Benz and BMW.
Up to 250,000 European-made vehicles will eventually be set to enter India at a preferential duty rate, far exceeding the limit of 37,000 allowed by the UK agreed in a separate deal last year.
India has also agreed to gradually reduce customs duties on European wines and spirits from 20 to 40%, compared to the current 150%. Duties on olive oil and processed foods, such as pasta and chocolate, will be reduced to zero.
But in a nod to European agricultural interests, the EU is maintaining tariffs on beef, chicken, sugar, flour, garlic and ethanol, an outcome that could help get the deal approved by the agricultural-interest-sensitive European Parliament.
Trade negotiations between the two countries began as early as 2007 but were abandoned due to disputes over access to cars, agriculture and dairy products.
However, they resumed in 2022 and accelerated enthusiastically over the past six months in the face of heavy punitive tariffs imposed by the Trump administration on the United States and common concerns about China’s monopoly on global manufacturing and the country’s restrictions on major exports.
India is facing 50% tariffs on its exports to the United States, and six EU countries have been threatened with higher tariffs over their objections to Trump’s attempts to seize Greenland.
According to officials, the official signing of the agreement will take place later this year and could come into effect early next year.
EU officials say a turning point came when von der Leyen and his team of commissioners visited New Delhi last February to deepen ties with India and pledged to conclude the trade deal by the end of the year.
As it attempts to diversify its trading partners, the EU has also recently concluded trade deals with the South American Mercosur bloc, Indonesia and Switzerland. India has signed agreements with the United Kingdom and Oman.
One factor that helped trade negotiators avoid past difficulties was putting the issue of worker mobility on a separate negotiating track. As an EU member state, the UK, for example, had opposed India’s demands that more skilled professionals be able to enter European countries on six-month visas.
The agreement was immediately welcomed by centrist and center-right forces in the European Parliament. “The EU is serious about cultivating new trading partners, and among the world’s relatively untapped markets, India stands out as one of the most promising,” said German Christian Democrat MEP Angelika Niebler, who chairs the European Parliament’s delegation to India.
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