India and the European Union have announced a landmark trade deal, ending nearly 20 years of sustained negotiations as both sides seek to deepen economic ties amid rising global trade tensions.
“This is the mother of all deals,” Ursula von der Leyen said at a briefing in Delhi, while Narendra Modi described the pact as “historic”.
The agreement will allow free trade in goods between the 27 EU member states and the world’s most populous country, which together account for almost 25 percent of global GDP and form a common market of around two billion people. It is expected to significantly reduce tariffs, improve market access and strengthen supply chain integration on both sides.
Von der Leyen and António Costa were in Delhi for a bilateral summit with Modi, where the deal was finalized ahead of formal approval by the European Parliament and Council later this year.
Under the deal, tariffs on most EU exports of chemicals, machinery and electrical equipment, and aircraft and spacecraft will be eliminated or gradually reduced. What is crucial for European car manufacturers is that tariffs on motor vehicles, which are currently 110 percent, will be reduced to 10 percent with a quota of 250,000 vehicles. According to Bloomberg, this quota is six times higher than the 37,000 units granted to Britain under its trade deal with India signed last July.
For India, the deal will provide “preferential access” to the EU for almost all exports, with textiles, leather goods, marine products, handicrafts, gems and jewelry among the biggest beneficiaries. Tariffs will also be reduced or eliminated on goods such as tea, coffee, spices and processed foods, although Delhi said it has protected sensitive sectors such as dairy products, grains, poultry, soya flour and certain fruits and vegetables.
Both sides said the agreement would boost investment flows, deepen manufacturing and services ties and improve access for small businesses. A parallel mobility framework will ease short-term travel restrictions for professionals moving between India and the EU.
“This is India’s biggest free trade agreement,” Modi said. “It will make it easier for our farmers and small businesses to access European markets, boost production and services and strengthen innovative partnerships.”
The deal comes against a tense geopolitical backdrop. India is still grappling with 50 percent tariffs imposed by Donald Trump last year as talks over a US-India trade deal continue to drag on. The EU has also faced pressure from Washington, including recent threats over Greenland, before the US president relented.
Von der Leyen described the agreement as a strategic response to this pressure. “This is the story of two giants, the world’s second and fourth largest economies, who chose to partner in a true win-win situation,” she said, calling it a “powerful message that cooperation is the best answer to global challenges.”
Costa added that the deal sends an “important political message” at a time when protectionism is rising and “some countries have decided to increase tariffs.”
Beyond trade, India and the EU are also advancing talks on security, defense and climate cooperation. India’s Defense Minister Rajnath Singh said discussions with Kaja Kallas covered defense supply chains, maritime security and cyber threats. According to Reuters, a draft security and defense partnership is currently under development.
The EU is already India’s largest trading partner in goods trade. Bilateral trade in goods reached $136 billion (£99.4 billion) in 2024-25 – almost double the level a decade ago. Negotiations on a free trade agreement first began in 2007, but stalled in 2013 due to market access and regulatory issues before officially resuming in July 2022.
The breakthrough comes as both Delhi and Brussels seek to secure alternative markets for exporters. India has signed major trade deals with the United Kingdom, Australia, Oman and New Zealand in recent years, while a pact with the European Free Trade Association came into force last year. Meanwhile, the EU reached a long-awaited trade deal with Mercosur earlier this month after 25 years of negotiations.
The formal signing of the agreement between India and the EU is expected later this year once the legislative approval process on the European side is completed.
