Prime Minister Narendra Modi held a bilateral meeting with European Council President Antonio Luis Santos da Costa and European Commission President Ursula von der Leyen in the national capital as part of India’s ongoing state visit to India.
The meeting was held in the Hyderabad House with the participation of the EU High Representative for Foreign Affairs and Security Policy, Kaja Kallas.
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Earlier in the day, Prime Minister Modi announced a landmark free trade agreement between India and the EU that could change the dynamics of global trade. Later, Leyen also announced that Europe and India are making history today by closing the mother of all deals.
“We have created a free trade zone with two billion people that will benefit both sides. This is just the beginning. We will expand our strategic relationship to make it even stronger,” she said in a post on X.
A formal India-EU Free Trade Agreement (FTA) is expected to be signed in six months. The agreement will further strengthen India-EU cooperation in key policy areas such as trade, security and defence, clean transition and people-to-people cooperation.
Why does the agreement matter?
Once completed, the deal would end two decades of negotiations and partnership-building between two of the world’s largest democratic markets.
From initial recognition in the 1960s to the establishment of annual summits and joint initiatives in the 21st century, India-EU relations have advanced significantly, reflecting mutual interests in trade, investment and sustainable development, the Ministry of External Affairs said.
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In 1962, India became one of the first countries to establish diplomatic relations with the European Economic Community, the predecessor of the EU.
Nipun Sharma, CEO of TeamLease Degree Apprenticeship, said the EU-India FTA presents a significant opportunity for India to deepen its integration into global value chains, particularly in export-oriented manufacturing and high-value services.
“It can accelerate India’s transition from being predominantly assembly and services to moving up the value chain across component manufacturing, testing, quality assurance, engineering and services to become a competitive producer of electronics, automotive components, green technology, pharmaceuticals and digital services for European markets,” he said.
Experience from agreements such as the EU-Vietnam Free Trade Agreement shows that trade liberalization coupled with investment and harmonization of standards can unlock rapid export growth and industrial modernization, Sharma said.
Timing is significant
The timing of the India-EU Free Trade Agreement (FTA) is significant. It comes amid heightened geopolitical turbulence and market uncertainty, driven in part by US President Donald Trump’s tariff stances and the Russia-Ukraine war, which shows no sign of resolution.
The United States has already expressed concern over the timing of the landmark deal. US Treasury Secretary Scott Bessent criticized the EU for concluding a trade pact with India while trade talks between Delhi and Washington are still ongoing.
In an interview with ABC News, Bessent said the US carried a heavier burden than Europe in trying to end the Russia-Ukraine war.
“We put a 25% tariff on India for buying Russian oil. Guess what happened last week? The Europeans signed a trade deal with India,” he said, accusing European countries of indirectly financing the war through energy trade.
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“Russian oil goes to India, refined products come out and the Europeans buy refined products. They are financing a war against each other,” he said, repeating his old criticism of India’s oil purchases from Russia.
“India’s Largest Trading Partner for Goods”
The EU remains India’s largest trading partner for goods, with bilateral trade reaching around US$136 billion in 2024-25. The EU is also one of India’s major trading partners in both goods and services.
The FTA, whenever implemented, would significantly further boost trade between India and EU member states. And this amid a global push to eliminate risky supply chains as trade disruptions intensify under the Trump administration’s US policies.
The trade pact may allow duty-free access to more than 90 percent of Indian goods in the vast EU market, which has 27 member countries, including Germany, France, Italy, Spain and Belgium, according to an earlier Hindustan Times report.
The trade deal would see tariffs on more than 90% of EU goods exports removed or reduced, saving up to €4 billion a year in tariffs on European products, according to an EU statement.
It also provides a competitive advantage for EU exporters, with India providing the largest trade opening to all trading partners. According to the statement, it will also lead to the simplification of customs procedures to make exports faster and easier and to ensure the protection of EU intellectual property such as trademarks.
How does the deal benefit EU industry?
India will provide the EU with tariff reductions not received by any of its other trading partners, dramatically improving market access for EU exports.
We have created a free trade zone with two billion people that benefits both sides. This is just the beginning.
For example, tariffs on cars will gradually drop from 110% to 10% with a quota of 250,000 vehicles per year. High tariffs of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals will mostly be removed, the statement said.
