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India and the EU have finalized a historic free trade agreement, which European Commission President Ursula von der Leyen described as the "mother of all agreements."
The agreement comes after almost two decades of intermittent negotiations between India and the EU, which accelerated greatly in the last six months and were finally concluded late on Monday evening.
The deal is expected to open up India's vast and traditionally tightly guarded market to the bloc's 27 countries, with a focus on manufacturing and services. It will ease market access for key European products, including cars and wine, in exchange for easier exports of textiles, gemstones and pharmaceuticals.
The agreement is expected to double EU exports to India by 2032 by eliminating or reducing tariffs on 96.6% of goods traded by value and would lead to savings of €4 billion in duties for European companies.
Tariffs will be reduced to zero for a wide range of industrial products, including almost all iron and steel, plastics, chemicals, machinery and pharmaceuticals.
"Europe and India are making history today. We have concluded the most important agreement. We have created a free trade area of 2 billion people, from which both sides will benefit ," von der Leyen said after arriving in Delhi, where she met with Indian Prime Minister Narendra Modi on Tuesday.
Von der Leyen had previously said she expected exports to India to double after the deal, with the EU being given unprecedented access to the Indian market, which was previously heavily protected. The agreement must be ratified by EU member states, the European Parliament and the Indian cabinet before it can enter into force.
The trade deal is part of a series of agreements announced at a summit on Tuesday as the EU and India grapple with Donald Trump's tariffs, China's economic clout and Russia's invasion of Ukraine. The two sides are also expected to sign a security pact to deepen joint work on maritime security, hybrid threats and the fight against terrorism.
The security agreement has been described by the EU as a way to “advance alignment” following concerns about India’s ties with Russia. The two sides also reached an agreement on labor mobility to open up opportunities for young professionals and seasonal workers, while pledging to start talks on India’s inclusion in the EU’s Horizon research program.
India, the world's most populous country with 1.4 billion people, is also one of the world's fastest-growing economies and is on track to become the fourth-largest economy this year, according to the International Monetary Fund.
Modi called Tuesday's deal "the largest free trade agreement in history."
" This agreement has brought great opportunities to 1.4 billion Indians and millions of people in European countries. It has become a wonderful example of synergy between the world's two leading economies ," he said.
The deal will see Delhi reduce tariffs on cars to 10% over five years from 110% currently, according to an EU statement, benefiting European carmakers such as Volkswagen, Renault, Mercedes-Benz and BMW.
India has also agreed to gradually reduce tariffs on European wines and spirits to 20% to 40%, from the current rate of 150%. Tariffs on olive oil and processed foods, such as pasta and chocolate, will be reduced to zero.
But, in a sign of respect for European agricultural interests, the EU is maintaining tariffs on beef, chicken, sugar, flour, garlic and ethanol, a result that could help the deal pass the European Parliament, which is sensitive to agricultural interests.
Trade talks between the two countries began in 2007, but were suspended due to disputes over access to machinery, agriculture and dairy products.
However, they resumed again in 2022 and accelerated sharply over the past six months in the face of heavy punitive tariffs from the Trump administration in the US and shared concerns about China's monopoly on global manufacturing and the country's restrictions on key exports.
India is facing 50% tariffs on exports to the US, and six EU countries were threatened with higher tariffs because of their objections to Trump's efforts to invade Greenland.
Officials say the formal signing of the deal will take place later this year and could come into force early next year. EU officials say a turning point came when von der Leyen and her team of 27 EU commissioners flew to New Delhi last February to deepen ties with India and pledged to complete the trade deal by the end of the year.
As it seeks to diversify its trading partners, the EU has recently reached trade deals with the South American bloc Mercosur, Indonesia and Switzerland. India has signed agreements with the United Kingdom and Oman.
One factor that helped trade negotiators avoid the difficulties of the past was moving the issue of labor mobility to a separate negotiating track.
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