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India and the EU have finalised a landmark free trade agreement, which the European Commission president, Ursula von der Leyen, hailed as the “mother of all deals”.
The agreement comes after almost two decades of on-off negotiations between India and the EU, which vastly accelerated in the past six months and were finally concluded late on Monday night.
The deal is expected to open up India’s vast and traditionally tightly guarded market to the 27 nations in the bloc, with a focus on manufacturing and the services sector. It is expected to ease market access for key European products, including cars and wine, in return for easier exports of textiles, gems and pharmaceuticals.
The agreement is expected to double EU exports to India by 2032 by eliminating or cutting tariffs in 96.6% of traded goods by value, and would lead to savings of €4bn (£3.5bn) in duties for European companies, the EU said.
“Europe and India are making history today,” von der Leyen said in a statement after landing in Delhi, where she met the Indian prime minister, Narendra Modi, on Tuesday. “We have concluded the mother of all deals. We have created a free trade zone of two billion people, with both sides set to benefit.”
Von der Leyen had previously stated that she expected exports to India to double after the deal, with the EU granted unprecedented access to the previously heavily protected Indian market.
India, the world’s largest country with a population of 1.4 billion, is also one of the world’s fastest-growing economies and is on track to become its fourth-largest economy this year, according to the International Monetary Fund.
The deal is one of the most comprehensive that India has ever signed and Modi emphasised that it represented about a third of global trade, calling it the “biggest free trade deal in history”.
“This agreement has brought massive opportunities for 1.4 billion Indians and millions of people in European countries,” he said. “It has become a wonderful example of synergy between two of the world’s major economies.”
The deal will lead to Delhi slashing tariffs on cars to 10% over five years from as high as 110%, according to an EU statement, benefiting European carmakers such as Volkswagen, Renault, Mercedes-Benz and BMW.
Trade talks between the two countries began as far back as 2007 but were abandoned owing to disputes over access to cars, agriculture and dairy.
However, they were resumed again in 2022 and accelerated with gusto over the past six months in the face of heavy punitive tariffs by Donald Trump’s administration in the US and joint concerns over China’s monopoly over global manufacturing and the country’s restrictions on key exports.
India is grappling with 50% tariffs on exports to the US and the EU is facing threats of higher tariffs over its objections to Trump’s attempts to take over Greenland.
According to officials, the formal signing of the deal will take place later this year and it could come into play by early next year.
