New Delhi: India and the European Union (EU) concluded a free trade agreement billed as the “mother of all deals”, with their leaders pitching commerce as a shield against protectionism and promising to promote a rules-based world order while expanding security and defense ties.
Prime Minister Narendra Modi hosted European Council President Antonio Costa and European Commission President Ursula von der Leyen for the India-EU summit a day after attending the Republic Day celebrations as chief guest of the leaders of the 27-member bloc – an honor reserved for India’s closest strategic partners.
The EU will eliminate duties on 99% of Indian exports by value over seven years, with the deal cutting duties on $33 billion of labour-intensive goods including textiles, leather, footwear, gems and jewelery once signed. India will cut tariffs on 96.6% of its exports to the EU, with about a third of the cuts taking effect immediately when the agreement becomes operational in early 2027, with the remainder phased in over five to 10 years.
The agreement comes as both sides seek to confront what von der Leyen calls a world where “trade is increasingly weaponized” — a veiled reference to the Trump administration’s on-again, off-again tariff policies that have disrupted global commerce.
“Today, India has signed the largest free trade agreement in its history,” Modi said during a media interaction with EU leaders. He said the total two-way trade is €180 billion and more than 800,000 Indians live in the EU region. Referring to the date, he said, “It is a happy coincidence that on this day, India is entering into this FTA with 27 countries of the European Union.”
The full text of the agreement will be published in mid-February, followed by legal review and translation, with formal signing expected in August.
“This historic agreement will facilitate access to the European market for our farmers and small industries, create new opportunities in manufacturing and further strengthen cooperation between our service sectors,” Modi said.
Separately, the government said Indian services companies gained access to 144 EU sub-sectors across market sectors, while 102 were opened up to European providers, expanding opportunities in IT, professional services, education and business consulting.
“This FTA will boost investment between India and the EU, create new innovation partnerships and strengthen supply chains globally,” Modi said.
Von der Leyen, who had set a deadline of the end of 2025 for concluding talks with Modi, said: “Prime Minister, distinguished friend, we did it. We delivered the mother of all deals. We are creating a market of two billion people. This is a story of two giants, the world’s second and fourth largest economies, choosing partnership in a true win-win fashion, a strong message that cooperation is the best answer to global challenges.”
He said the agreement would cut annual tariffs for exporters by €4 billion and create jobs for millions of workers in India and Europe.
None of the leaders directly mentioned US trade policies, but all stressed the need for India and the EU to respond to the changing global environment. “The global system is in great turmoil today. In such a situation, the partnership between India and the European Union will strengthen stability in the international system,” Modi said in Hindi.
Indian consumers will benefit from reduction in European car tariff from 110% to 10% for 250,000 vehicles annually under calibrated liberalization. Wine levy reduced from 150% to 20-30%, spirits duty reduced from 150% to 40%. The EU has seen huge duty cuts on machinery, pharmaceuticals and medical devices.
The EU is India’s largest trading partner, accounting for €120 billion in goods trade in 2024 or 11.5% of India’s total trade. Services trade to reach €59.7 billion in 2023. Once approved, the deal could boost Indian textile and jewelery exports, hit by 50% US tariffs since last year. Talks started in 2007 stalled in 2013 before resuming in June 2022 over what officials called a “gap in ambition”.
Formal signature is scheduled for August 2026, followed by ratification. The agreement comes into force in early 2027, nearly two decades after negotiations began.
Highlighting the scope for expansion, Commerce Minister Piyush Goyal said India accounts for only 1.5% of the EU’s $6.5 trillion goods imports and 2.5% of the nearly $3 trillion services imports.
“With this wide opening of opportunities, the EU has opened up many new areas for us,” he said. “In marine products, about 94% of tariff lines get duty-free access. In textiles, apparel, home furnishings, where India has serious labour-intensive interests, 100% of European markets will be open from day one.”
There are currently 12% EU tariffs on Indian textiles, 17% on leather and footwear, 14% on electronics – all to be immediately phased out when implemented. These sectors alone represent $33 billion in existing exports poised for substantial growth.
On the EU’s carbon border adjustment mechanism, a contentious last-stage issue, Commerce Secretary Rajesh Aggarwal said the two sides will begin technical talks to ensure that Indian industries continue to have market access despite the CBAM rules. He said, “We will work together to see that verifiers for CBAM in India are accredited by EU agencies to enable our industry (market) to access. We will work together to understand the technical processes through which CBAM measurement will be done in both the economies.” India secured a commitment that any CBAM flexibility granted to other countries would automatically extend to India. Any future Indian carbon trading system will be integrated with EU rules so that the carbon cost of Indian industry can be recorded under CBAM.
Beyond the trade agreement, the two sides signed a security and defense partnership to deepen cooperation in counter-terrorism, maritime and cyber security, and defense industrial cooperation for co-development and co-production of military hardware – at the same time as EU states are reviving defense capabilities amid the end of US security guarantees.
They finalized a comprehensive mobility framework to facilitate the movement of Indian students, researchers and skilled workers. The European Union will launch its first Legal Gateway Office in India, which will be a one-stop hub to support talent migration in line with EU Member State policies.
A new roadmap, “Towards 2030: A Joint India-EU Comprehensive Strategic Agenda”, guides the partnership across five pillars: prosperity and stability, including trade and green transition; Technology and innovation, including AI and semiconductors; Security and Defense; Connectivity and global issues; and enablers including skills mobility and simplified Schengen visa procedures.
Costa, who has his roots in Goa and displayed his Overseas Citizen of India document at the talks, said the summit sends a message that the two sides “stand together as strategic and trusted partners” as the global order is reshaped. “Trade agreements strengthen the rules-based economic order and promote shared prosperity. That’s why today’s FTA is of historic importance – one of the most ambitious agreements ever signed, creating a $2 billion market,” he said. “As the world’s two largest democracies, we are working hand in hand to shape a resilient global order that underpins peace and stability, economic growth and sustainable development,” Costa said.
He said the EU and India share the responsibility of upholding international law at the core of the UN Charter. “Cooperation between the EU and India will help shape a more balanced, resilient and inclusive global order.” He said the EU can count on Modi to help create conditions for peace in Ukraine through dialogue and diplomacy.
Modi said the security and defense partnership strengthens the commitment to the rules-based order. “The scope of our cooperation in the Indo-Pacific region will expand. Our defense companies will realize new opportunities for co-development and co-production.” Von der Leyen called the security agreement an “important departure and trust-based platform” for cooperation to enhance mutual resilience. Apart from joint naval exercises against piracy, both sides will counter cyber and hybrid threats, advance space security dialogue and negotiate information security agreements.
The leaders reaffirmed their commitment to the India-Middle East-Europe Economic Corridor to strengthen connectivity. Modi said he would position IMEC as a key pillar of global trade and expand trilateral projects from the Indo-Pacific to the Caribbean, supporting agriculture, clean energy and women’s empowerment.
A joint statement expressed concern over the humanitarian suffering and global consequences caused by the Ukraine war, reiterating support for a comprehensive, just and lasting peace through negotiations based on international law, sovereignty and territorial integrity.
On Gaza, both sides supported the implementation of UN Security Council resolution 2803 empowering the Peace Board and calling for durable peace, unhindered humanitarian access and a two-state solution. “The two sides discussed recent developments of concern in Iran and the region,” the statement said.
Sunil Bharti Mittal, Chairman, Bharti Enterprises, said the FTA signals confidence and stability in the changing economic order. “It will open avenues for cooperation in digital infrastructure, space connectivity and secure networks, providing attractive opportunities for European investors to engage with India for global markets.”
Chandrajit Banerjee, director general of the Confederation of Indian Industry, called the deal a “strategic breakthrough” in India’s global trade engagement. Preferential access to over 99% of Indian exports “decisively improves competitiveness in the EU’s high-value market, embeds Indian manufacturers deeper into global value chains, and accelerates investment, technology flows and scale.”
“EU farmers may oppose agricultural imports from India,” HSBC’s chief India economist strategist, ASEAN economist Pranjul Bhandari and chief European economist Simon Wells said in a note.
“The FTA still needs to be approved by the European Parliament (EP), which will take at least a year. Recently, the European Court of Justice did not approve the EU-MERCOSUR deal, which is now awaiting the EP’s decision,” he said.
“Secondly, the EU’s carbon border levy may reduce some of the tariff benefits for India, especially for sectors like steel, although today’s press release mentions that some flexibilities have been secured. Anyhow, key sectors like pharma and textiles are relatively less carbon intensive,” he said.
