After nearly two decades of intermittent negotiations, India and the European Union (EU) have announced the conclusion of a landmark free trade agreement, hailed by Commission President Ursula von der Leyen as the “mother of all deals.”
Indian prime minister Narendra Modi hailed the “historic” trade deal with the European Union, which came after nearly two decades of intermittent negotiations.
At a joint press conference in with von der Leyen in New Delhi, Modi said the pact linking the world’s second and fourth largest economies creates a combined market of nearly two billion people, accounting for around a quarter of global GDP and close to one-third of all world trade.
Through the deal, India aims to boost the competitiveness of its labour-intensive exports like textiles and apparel. Long the backbone of its manufacturing employment, these sectors stand to gain significantly as EU tariffs of 12–16% on many garments and textile products were removed, strengthening India’s competitive edge over regional rivals like Bangladesh, Vietnam, and Sri Lanka.
Similarly, leather goods and footwear exports are poised for significant growth, as duty-free access under the deal makes Indian products more appealing to European consumers. Gems and jewellery, another labour-intensive sector, heavily reliant on traditional craftsmanship, too, stands to benefit from the removal of restrictive duties, enhancing both market reach and profit margins.
Furthermore, exports in sectors like IT, telecoms, consulting, and assorted financial services – which collectively contribute a substantial portion of India’s GDP – are expected to see sustained revenue and employment growth from eased EU regulatory barriers, streamlined licensing, and simplified cross-border operations.
Marine products, speciality chemicals, and pharmaceuticals, which are a growing part of India’s export basket, also stand to benefit from zero-tariff access to the EU. Analysts predict this could accelerate industrial investment, expand SME participation in exports, and boost India’s trade balance.
Defence and security co-operation also forms part of the deal, with European firms viewing India’s growing military manufacturing ecosystem as an opportunity for co-development, technology transfer, and long-term industrial partnerships. Military analysts note that closer defence ties will help Delhi diversify suppliers, reduce over-dependence on any single materiel provider such as Russia, and safeguard its long-standing strategic autonomy.
Notably, however, agricultural products are largely excluded to protect farmers’ incomes and to safeguard Modi’s political interests.
India’s agricultural sector, which employs just under half of its workforce of around 250 million, comprises the core base of Mr Modi’s ruling Hindu nationalist Bhartiya Janata Party (BJP) and has largely been responsible for electing him for a third consecutive, five-year term in 2024. Hence, India’s rural workforce and farming communities needed protection from imports, as liberalised trade in dairy, cereals, and staples could threaten their livelihoods and would erode support for the BJP.
Beef imports too are strictly off the table due to religious sensitivities; cows are sacred to Hindus, who make up nearly 80 % of India’s 1.4 billion population, and their protection is a major element of Modi’s overall political agenda.
Another benefit for India is trade diversification and reducing its reliance on the US.
Last August, Washington had imposed punitive tariffs of 50 per cent on Indian exports – 25 per cent linked to Russian crude oil purchases – exposing Delhi’s financial vulnerability and underscoring the urgency of seeking alternative markets like the long-pending EU agreement.
Although the deal announcement formally closes negotiations, several procedural steps remain before it becomes operational: legal ‘scrubbing’ or vetting, translation into multiple EU languages, and ratification by the European and Indian parliaments. Officials on both sides expect the deal to enter into force early next year.