India and the European Union have finalized a “landmark” free trade agreement, Prime Minister Modi said, marking a breakthrough in negotiations that have stretched on for nearly two decades and signaling a major shift in global trade alignments.
Speaking at India Energy Week on Tuesday, Narendra Modi described the pact with the European Union as the “mother of all deals.” The agreement, finalized on Monday, is set to deepen economic ties between two of the world’s largest markets and comes at a time when international trade is under strain from rising geopolitical tensions.
A Market of Two Billion People
Together, India and the EU account for roughly a quarter of global GDP and nearly one-third of global trade. Modi said the new free trade agreement would complement India’s recent pacts with the U.K. and the European Free Trade Association, helping to create a combined market of around two billion consumers.
“This deal will be extremely supportive for sectors such as textiles, gems and jewelry, leather, and footwear,” Modi said in remarks delivered in Hindi, emphasizing the agreement’s potential to boost employment and exports across labor-intensive industries.
Years in the Making
The agreement is expected to be formally detailed later in the day at the India–EU summit in New Delhi, where Modi and Ursula von der Leyen are slated to issue a joint statement. Talks on the pact have been ongoing for nearly 20 years, frequently stalled by differences over tariffs, market access, and regulatory standards.
For New Delhi, the timing is critical. India has been grappling with steep U.S. tariffs imposed last year, prompting the government to aggressively diversify export destinations. Since August, India has signed or advanced trade deals with countries including the U.K., Oman, and New Zealand, making this its fourth major trade agreement in a short span.
Trade Numbers Tell the Story
According to European Commission data, goods trade between India and the EU crossed €120 billion (about $140 billion) in 2024, making the bloc India’s largest trading partner. Key Indian exports to Europe include machinery and appliances, chemicals, base metals, mineral products, and textiles.
India, meanwhile, ranks as the EU’s ninth-largest trading partner, accounting for 2.4% of the bloc’s total goods trade—well behind heavyweights like the United States, China, and the U.K. European exports to India are dominated by machinery, transport equipment, and chemicals.
Europe’s Trade Philosophy
Von der Leyen underscored Europe’s broader trade stance earlier this month at the World Economic Forum in Davos, saying the EU is committed to “choosing fair trade over tariffs, partnership over isolation, and sustainability over exploitation.”
Despite the scale of the India–EU deal, analysts caution that it cannot fully substitute for access to the U.S. market. In 2024, India recorded a $45.8 billion goods trade surplus with the U.S., compared with a significantly lower $25.8 billion surplus with the EU.
A Milestone, Not the Finish Line
Still, experts agree the agreement represents a major milestone for India’s trade strategy. While it may not replace the need for an eventual India–U.S. deal, the India–EU free trade pact strengthens New Delhi’s hand globally—diversifying risk, expanding market access, and reinforcing its role as a central player in an increasingly fragmented world economy.
