India and the European Union announced on Tuesday the ‘mother of all deals’, a huge trade pact to create a market of two billion people, reached after two decades of negotiations.
EU chiefs and prime mMinister Narendra Modi hope the pact will help shield against challenges from the world’s two leading economies, the United States and China.
The agreement will cut or eliminate tariffs on almost 97 per cent of European exports, saving up to 4 billion euros ($4.75 billion) annually in duties, the 27-nation bloc said.
‘A mother of all deals,’ Modi said Tuesday in the capital New Delhi, where he met with European Commission president Ursula von der Leyen and European Council president Antonio Costa.
‘This deal will bring many opportunities for India’s 1.4 billion and many millions of people of the EU,’ Modi said, adding the agreement ‘represents about 25 per cent of global GDP, and one-third of global trade’.
The EU has eyed India — the world’s most populous nation — as an important market for the future.
‘Europe and India are making history today,’ von der Leyen said in a statement, a day after she and Costa were feted as guests of honour at India’s Republic Day parade.
‘We have created a free trade zone of two billion people, with both sides set to benefit.’
EU officials said the deal was the most ambitious India had ever signed, and European companies would benefit from so-called ‘first mover advantage’.
Europe’s key agricultural, automotive and service sectors stand to gain.
New Delhi sees the European bloc as an important source of much-needed technology and investment to rapidly upscale its infrastructure and create millions of new jobs.
Bilateral trade in goods reached 120 billion euros ($139 billion) in 2024, an increase of nearly 90 per cent over the past decade, according to EU figures, with a further 60 billion euros ($69 billion) in trade in services.
Under the agreement, India is expected to ease market access for key European products.
Tariffs on cars will be gradually lowered from a top rate of 110 per cent to as low as 10 per cent, while duties on wines progressively go down from 150 per cent to as low as 20 per cent.
Currently at 50 per cent, tariffs on processed foods — including pasta and chocolate — will be eliminated, according to the EU.
Von der Leyen said she expected exports to India to double, and that the EU would ‘gain the highest level of access ever granted to a trade partner in the traditionally protected Indian market’.
European firms will get privileged access to the Indian financial services and maritime transport market, the bloc said.
For India, it would boost sectors including textiles, gems and jewellery, and leather goods, as well as the service sector, Modi said.
Talks went down to the wire on Monday, focusing on a few sticking points, including the impact of the EU’s carbon border tax on steel, according to sources familiar with the discussions.
The accord comes as both Brussels and New Delhi have sought to open up new markets in the face of US tariffs and Chinese export controls.
India and the EU were also expected to conclude an accord to facilitate movement for seasonal workers, students, researchers and highly skilled professionals, and a security and defence pact.
‘India and Europe have made a clear choice. The choice of strategic partnership, dialogue and openness,’ von der Leyen wrote on social media. ‘We are showing a fractured world that another way is possible.’
India is on track to become the fourth-largest economy this year, according to International Monetary Fund projections.
New Delhi, which has relied on Moscow for key military hardware for decades, has tried to cut its dependence on Russia in recent years by diversifying imports and pushing its own domestic manufacturing base.
Europe is doing the same with regard to the United States.
