INDIA–EU summit: Modi announces free trade agreement with European Union – “Mother of all deals”, von der Leyen

Germany’s finance minister said on Tuesday that the trade deal reached by the European Union and India could accelerate economic growth and deepen strategic ties.

“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,” Vice Chancellor and Finance Minister Lars Klingbeil said in a statement.

Trade deal expected to double European exports to India by 2032

The European Union (EU) and India have agreed upon a landmark free trade agreement which will cut or eliminate tariffs on almost 97 percent of European exports, saving up to 4 billion euros ($4.75 billion) annually in duties, the 27-nation bloc said.

Under the agreement, India will grant the EU tariff reductions no other trading partner has received. It also addressed climate action, environmental protection, labor rights and women’s empowerment.

Here are some more details of the deal, which is expected to be formally signed later this year after legal vetting:

• The agreement is set to double European exports to India by 2032
• Duties on cars will fall from as high as 110% to as low as 10% over time, while tariffs on car parts will be abolished within 5-10 years
• Levies on machinery, chemicals and pharmaceuticals to be largely eliminated
• Sharp cuts to agri-food tariffs, currently averaging more than 36%
• Indian duties on wine will drop from 150% to 75% initially and eventually to around 20%
• Olive oil tariffs will fall to zero within five years
• Levies on processed foods such as bread and confectionery will be removed
• All imports to the EU to continue to meet strict EU food safety standards
• A new EU-India climate cooperation platform to be launched in 2026
• A €500-million EU fund over two years is expected help India cut emissions and increase sustainable industrial transformation
• The EU will cut tariffs on 99.5% of goods traded over seven years
• Tariffs on Indian marine goods, leather products, chemicals, rubber, base metals and gems and jewelry to be cut to zero

India-EU summit aimed at restoring stability amid global trade disruption, expert says

The partnership between India and the European Union (EU) is increasingly driven by global trade uncertainty, linked to US tariff policies, and shifting power dynamics, an expert told DW.

Biswajit Dhar, Distinguished Professor at the Council for Social Development in New Delhi, said the past year of disruption in international commerce has underscored the need for predictable and stable trading partners.”Global trade rules have been thrown up into the air,” Dhar said, adding, “in this scenario it became important for India and the EU to turn to each other, not only to safeguard bilateral trade, but to expand it.”

He urged New Delhi and Brussels to take a leadership role in reviving multilateral institutions such as the World Trade Organization.

Further, emphasizing cooperation with other like-minded countries, he said, “the multilateral system still offers the best long-term guarantee for fair and predictable trade”.

The EU is already India’s largest trading partner and offers a more consistent policy environment than Washington, where shifting tariff decisions have raised costs and risks.

“Pressure from the US has effectively pushed countries into these kinds of agreements, Dhar explained. “Trading with the US has become unpredictable and difficult, which is why India and the EU finally moved faster after years of stalled negotiations.”

The two sides had been in talks for nearly two decades before recent progress.

And despite the political differences, especially India’s relationship with Russia, Dhar says, “India and EU have not targeted each other and tried to extract short-term benefits. In fact, these geopolitical issues are a matter of long-term strategy of different countries.”

He said that Europe understands where India is coming from. And so, the EU would ultimately want India to decrease its dependence on Russia. But India would need time to do that, if at all.

Dhar finds that the EU has adopted a tolerant approach to all these issues compared to the US, which, according to him, “has been actually hammering away all the time”.

While optimistic about the agreement’s potential, Dhar cautioned that future disagreements could emerge over environmental standards and EU’s carbon border tax (CBAM), which may affect some Indian industries.

“Market access will improve on both sides,” he said, “but how measures on carbon emissions, labor standards and sustainability are implemented will determine how smoothly this partnership develops.”