India and the European Union on Monday closed a “landmark” free trade agreement, touted as the ‘mother of all deals,’ Indian Prime Minister Narendra Modi said during a speech at the India Energy Week on Tuesday.
The FTA with the EU, which represents about 25% of global GDP and about a third of global trade, will also complement India’s deals with Britain and the European Free Trade Association, Modi said.
The agreement will forge a market of 2 billion people at a time when trade ties are being tested amid rising geopolitical tensions.
“I congratulate our colleagues associated with every sector, such as textiles, gems and Jewelry, leather and shoes. This deal will prove to be very supportive 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 in the day, revealing the details of the deal that had been in the making for nearly two decades.
Trade talks between the two sides were relaunched in 2022 and the deal has been long time in the making due to “mutually sensitive” issues such as agriculture and automotive. “India and European union can both be very protectionist,” Hosuk Lee Makiyama, director of European Centre for International Political Economy, told CNBC.
Neither the EU nor India have secured a large trade deal which could impact their economic growth, especially as U.S. and China are closed off for a deal, so this deal will be “one of the best they can get,” he said.
For New Delhi, which has been facing the brunt of punitive U.S. tariffs, this deal could be a much-needed shot in the arm. Since Trump imposed 50% tariffs on the Asian economy in August last year, it has been looking at alternative markets for its exports and has entered into trade deals with several countries.
This is India’s fourth major trade deal since the U.S., India’s biggest export market and a major trading partner, imposed steep tariffs in August. It has entered into a trade pact with the U.K., Oman and New Zealand.
According to European Commission data, goods traded between India and the EU in 2024 amounted to over 120 billion euros (about $140 billion), making the bloc New Delhi’s largest trading partner. Machinery and appliances, chemicals, base metals, mineral products and textiles are New Delhi top exports to the bloc. For the year ended March 2025, India-goods trade stood at $136 billion.
India is the ninth largest trading partner of the EU, accounting for 2.4% of the the bloc’s total trade in goods in 2024, far behind major partners like the U.S. (17.3%), China (14.6%), or the U.K. (10.1%). The EU’s main exports to India include machinery and appliances, transport equipment, and chemicals.
European Commission President Ursula von der Leyen said at the World Economic Forum in Davos on Jan. 20 that the bloc was set on “choosing fair trade over tariffs. Partnership over isolation. Sustainability over exploitation.”
India’s total exports to six major EU markets — Netherlands, Germany, Italy, Spain, France and Belgium — were $43.8 billion in the 9-month ending December compared to $65.88 billion for the U.S. alone.
Experts have said that even though India’s deal with the EU is a major milestone, it will not replace the need for an India-U.S. deal.
In 2024, India’s goods trade surplus with the U.S. was $45.8 billion, while for the EU it was substantially lower at $25.8 billion.