TOPSHOT – European Commission President Ursula von der Leyen (left) and Indian Prime Minister Narendra Modi look on before their meeting at Hyderabad House in New Delhi on February 28, 2025. The European Union is exploring a security and defense partnership with India, EU chief Ursula von der Leyen said on February 28 before meeting Prime Minister Narendra Modi in New Delhi. (Photo by Money SHARMA / AFP) (Photo by MONEY SHARMA/AFP via Getty Images)
Silver Sharma | Afp | Getty Images
India and the European Union on Monday concluded a “historic” free trade agreement, billed as “the mother of all agreements”, Indian Prime Minister Narendra Modi said on Tuesday during a speech during India Energy Week.
The FTA with the EU, which accounts for about 25% of global GDP and about a third of global trade, will also complement India’s agreements with Britain and the European Free Trade Association, Modi said.
The deal will create a market of 2 billion people at a time when trade relations are being tested amid growing geopolitical tensions.
“I congratulate our colleagues associated with all sectors, such as textiles, gems and jewelry, leather and footwear. This agreement will prove very favorable to these sectors,” Modi said in a speech in Hindi, translated by CNBC.
Modi and EU President Ursula von der Leyen are expected to make a joint statement at the India-EU summit in New Delhi later today, revealing details of the deal that has been in the works for almost two decades.
Trade negotiations between the two sides were restarted in 2022 and the deal took time to reach due to “mutually sensitive” issues such as agriculture and automobiles. “Both India and the European Union can be very protectionist,” Hosuk Lee Makiyama, director of the European Center for International Political Economy, told CNBC.
Neither the EU nor India have reached a major trade deal that could impact their economic growth, especially since the US and China are unable to strike a deal. This agreement will therefore be “one of the best they can get”, he said.
Largest trading partner
For New Delhi, which was confronted head-on with punitive US tariffs, this deal could be a much-needed boost. Since Trump imposed 50% tariffs on the Asian economy in August last year, the country has been seeking alternative markets for its exports and has struck trade deals with several countries.
This is India’s fourth major trade deal since the United States, India’s largest export market and one of its biggest trading partners, imposed high tariffs in August. It has a trade agreement with the United Kingdom, Oman and New Zealand.
According to European Commission data, goods traded between India and the EU in 2024 amounted to more than 120 billion euros (about $140 billion), making the bloc New Delhi’s largest trading partner. Household machinery and appliances, chemicals, base metals, mineral products and textiles are New Delhi’s major exports to the bloc. For the financial year ending March 2025, India’s merchandise trade with the EU stood at $136 billion.
India is the EU’s ninth largest trading partner, accounting for 2.4% of the bloc’s total merchandise trade in 2024, far behind major partners like the United States (17.3%), China (14.6%) or the United Kingdom (10.1%). The EU’s main exports to India include household machinery and appliances, transport equipment and chemicals.
European Commission President Ursula von der Leyen told the World Economic Forum in Davos on January 20 that the bloc was determined to “choose fair trade over tariffs. Partnership over isolation. Sustainability over exploitation.”
India’s total exports to six major EU markets – the Netherlands, Germany, Italy, Spain, France and Belgium – stood at $43.8 billion in the nine months ending December, compared to $65.88 billion for the US alone.
Experts said that while the India-EU deal is a major step, it will not replace the need for an India-US deal.
In 2024, India’s trade surplus in goods with the US stood at $45.8 billion, while that of the EU was significantly lower at $25.8 billion.
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