India and the European Union (EU) have finalized a landmark free trade agreement (FTA) after nearly two decades of negotiations, creating one of the world's largest trading blocs. The deal, described as the 'mother of all deals,' aims to eliminate or reduce tariffs on over 96% of traded goods by value, benefiting 1.4 billion Indians and 450 million Europeans.
Immediate Action & Core Facts
The agreement will:
- Double EU exports to India by 2032, saving European companies €4 billion ($6.87 billion) annually in duties.
- Cut Indian tariffs on European cars from 110% to 10% over five years, with a 250,000-vehicle quota benefiting manufacturers like Volkswagen and Mercedes-Benz.
- Eliminate tariffs on Indian textiles, leather, marine products, and gems/jewelry in the EU.
- Reduce tariffs on EU wines and spirits to 20% and 40%, respectively.
The pact was announced by Indian Prime Minister Narendra Modi and EU Commission President Ursula von der Leyen during a summit in New Delhi, with implementation expected in 2026.
Deeper Dive & Context
Economic and Strategic Implications
The deal represents 25% of global GDP and one-third of global trade, according to Modi. It comes as both India and the EU face U.S. tariffs—50% on Indian exports and 15% on EU exports—amid rising protectionism under President Donald Trump's administration.
Von der Leyen framed the agreement as a 'historic step' in bilateral ties, emphasizing rules-based cooperation. Modi called it a 'wonderful example' of partnership amid global turmoil.
U.S. Reaction and Alternate Trade Talks
U.S. Treasury Secretary Scott Bessent criticized the EU for signing the deal, noting America's higher tariffs on India for purchasing Russian oil. However, India's Petroleum Minister Hardeep Singh Puri stated that U.S.-India trade talks are at an 'advanced stage,' downplaying tensions.
The EU has recently signed similar deals with Mercosur, Indonesia, Mexico, and Switzerland, while India finalized pacts with Britain, New Zealand, and Oman.
Sector-Specific Benefits
For the EU: Key gains include access to India's protected market for cars, machinery, chemicals, and pharmaceuticals.
For India: Exports of textiles, gems, and marine products will face no EU tariffs, mitigating the impact of U.S. tariffs.
Geopolitical Context
The deal signals a strategic hedge against U.S. trade policies, with both sides emphasizing cooperation in defense, security, and mobility for skilled workers. EU Council President António Costa noted it sends a 'political message' favoring trade over tariffs.
Germany welcomed the agreement, calling it a growth opportunity amid 'challenging ties' with other economies.
The EU's fact sheet highlights that this is the biggest trade opening India has given to any partner, surpassing the UK's recent deal.