Linking markets that account for nearly a quarter of global output, the pact promises to redraw trade flows from cars to pharmaceuticals
The European Union and India on Tuesday announced a sweeping free trade agreement that officials on both sides described as one of the most significant economic deals of the decade, bringing together two markets representing nearly two billion people and close to a quarter of global economic output.
European Commission President Ursula von der Leyen hailed the accord as the “mother of all deals,” saying it would reshape commercial and strategic ties between Brussels and New Delhi.
“We have created a free trade zone of two billion people, with both sides set to benefit,” she said.
The agreement follows nearly twenty years of intermittent negotiations and is expected to dramatically expand trade flows by eliminating or reducing tariffs on most goods exchanged between the two economies. According to the European Commission, the deal will remove or cut duties on 96.6 percent of European Union exports to India, a move projected to double EU exports to the country by 2032.
In return, the European Union will cut tariffs on 99.5 percent of goods imported from India over a seven-year period.
Among the most immediate impacts will be sharp reductions in India’s high import taxes on European products, including wine and automobiles. Duties on imported cars, which currently reach as high as 110 percent, will fall gradually to as low as 10 percent. Tariffs on machinery, chemicals and pharmaceuticals will be largely eliminated, while levies on food products such as olive oil, bread and confectionery will also be phased out.
Indian Prime Minister Narendra Modi said the agreement would strengthen India’s manufacturing and services sectors and boost investor confidence.
“People around the world are calling this the mother of all deals. This agreement will bring major opportunities for the 1.4 billion people of India and the millions of people in Europe,” he said.
Beyond trade, the two sides also announced new frameworks for cooperation on defense, security and skilled labor mobility. EU foreign policy chief Kaja Kallas said the partnership would establish an annual security and defense dialogue and deepen diplomatic coordination.
“As the global order shifts, the EU will continue to deepen its diplomatic and economic ties across the world. Strong partnerships multiply our strength,” she said.
Germany’s vice chancellor and finance minister, Lars Klingbeil, called the agreement a catalyst for jobs and growth.
“This agreement creates new opportunities for growth and good jobs in Europe and India alike while deepening the strategic partnership with the world’s largest democracy,” he said.
European automakers are expected to benefit significantly from the deal. Companies including Volkswagen, Renault, Stellantis, BMW and Mercedes-Benz will gain broader access to India’s tightly protected car market, now the world’s third largest by sales. But analysts caution that competition from domestic manufacturers and compact Japanese imports will remain fierce.
“It’s a start. When we talk about exports from Europe, it’s only about premium cars. For the volume sector it is difficult,” said Stefan Bratzel of the German auto research group CAM.
Former Indian ambassador Sanjay Bhattacharyya described the agreement as a turning point in relations after years of stalled diplomacy.
“The history of talks was long and tough. There was a time when Europe was focused more on China and multilateral trade, and India didn’t have much leverage,” he said. “What has changed is the realization on both sides that India is now a large, fast-growing market, and China’s economic attraction has clearly dipped.”
He added, “For India, market access has always been the missing piece in our relationship with Europe. This agreement finally corrects that.”
The timing of the deal reflects broader geopolitical shifts, including trade disruptions and uncertainty driven by U.S. tariff policies and global supply chain realignments. Analysts say the agreement signals a strategic effort by both sides to build stable, long-term economic partnerships as multilateral trade systems weaken.
“Multilateralism is in crisis, the WTO is practically in a coma,” Bhattacharyya said. “So India and the EU have turned to bilateral deals to ensure growth, development and supply-chain resilience.”
The agreement will undergo legal vetting before being submitted to the European Parliament for ratification. A formal signing is expected later this year.
If approved, the pact will rank among the largest trade agreements ever concluded, binding two of the world’s most powerful economic blocs in a long-term partnership that extends beyond commerce into security, climate cooperation and geopolitical strategy.
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