Top Shot – European Commission President Ursula von der Leyen (left) and Indian Prime Minister Narendra Modi look on before a meeting at Hyderabad House in New Delhi on February 28, 2025. Before meeting Prime Minister Narendra Modi in New Delhi, European Commission President Ursula von der Leyen said on February 28 that the European Union is exploring a security and defense partnership with India. (Photo credit: Money SHARMA/AFP) (Photo credit: MONEY SHARMA/AFP via Getty Images)
Money Sharma | AFP | Getty Images
India and the European Union signed a “landmark” free trade agreement on Monday, touted as the “mother of all agreements,” Indian Prime Minister Narendra Modi said in a speech at India Energy Week on Tuesday.
Modi said the FTA with the EU, which accounts for about 25% of global GDP and about a third of global trade, would also complement India’s agreements with the UK and the European Free Trade Association.
The deal, which tests trade relations amid rising geopolitical tensions, would create a market of 2 billion people at once.
“I congratulate our colleagues across all sectors, including textiles, gems and jewellery, leather and footwear. This agreement will be of great support to these sectors,” PM Modi said in a speech in Hindi translated by CNBC.
Prime Minister Modi and EU President Ursula von der Leyen are expected to issue a joint statement at the India-EU summit in New Delhi later in the day, unveiling details of the deal, which has been in the works for nearly two decades.
Trade talks between the two countries will resume in 2022, but an agreement has taken a long time due to “mutually sensitive” issues such as agriculture and automobiles. “Both India and the European Union have the potential to become very protectionist,” Hosuk Lee Makiyama, director of the European Center for International Politics and Economics, told CNBC.
He said the deal would be “one of the best deals that both countries could get” as neither the EU nor India have signed any major trade deals that could affect economic growth, especially with the US and China closed to a deal.
largest trading partner
The deal could be a much-needed blow to New Delhi, which faces the brunt of punitive U.S. tariffs. Since President Trump imposed 50% tariffs on Asian economies last August, he has sought alternative markets for exports and has struck trade deals with several countries.
This is India’s fourth major trade deal since the United States, India’s largest export market and major trading partner, imposed steep tariffs in August. It has trade agreements with the United Kingdom, Oman, and New Zealand.
According to European Commission data, goods traded between India and the EU amounted to more than 120 billion euros (about $140 billion) in 2024, making the EU New Delhi’s largest trading partner. Machinery and appliances, household appliances, chemicals, base metals, mineral products and textiles are New Delhi’s largest exports to the region. In the year ended March 2025, trade in goods between India and the EU was $136 billion.
India is the EU’s ninth largest trading partner, accounting for 2.4% of the EU’s total trade in goods in 2024, far behind major partners such as the US (17.3%), China (14.6%) and the UK (10.1%). The EU’s main exports to India include machinery and equipment, transport equipment and chemicals.
European Commission President Ursula von der Leyen said at the World Economic Forum in Davos on January 20 that the European Union is committed to “choosing fair trade over tariffs, partnership over isolation, and sustainability over exploitation.”
In the nine months to December, India’s total exports to six major EU markets – the Netherlands, Germany, Italy, Spain, France and Belgium – were $43.8 billion, compared to $65.88 billion from the US alone.
Experts say the India-EU deal is a major milestone but does not replace the need for an India-US deal.
India’s goods trade surplus with the US in 2024 was $45.8 billion, but that with the EU was significantly lower to $25.8 billion.
