India, EU Seal ‘Mother of All Deals’ Free Trade Agreement, Slashing Tariffs and Expanding Bilateral Trade

New Delhi: India and the European Union have formally concluded negotiations on a comprehensive Free Trade Agreement (FTA), hailed by the government as the “Mother of All Deals” and described by the Commerce Ministry as one of the largest bilateral trade agreements signed anywhere in the world.

The deal assumes significance as India seeks to diversify its export markets amid rising trade tensions with the US following President Donald Trump’s imposition of 50 per cent tariffs.

At the signing ceremony and exchange of the political declaration marking the conclusion of negotiations, Prime Minister Narendra Modi said, “Yesterday was a historic moment when the European Union leaders took part in India’s Republic Day celebrations for the first time. Today is another such moment, when two major democratic powers are adding a decisive chapter in their relationship….”

Bilateral trade between India and the EU has expanded steadily in recent years. In 2024-25, merchandise trade stood at Rs 11.5 lakh crore, with Indian exports accounting for Rs 6.4 lakh crore and imports valued at Rs 5.1 lakh crore. Trade in services during the same period reached Rs 7.2 lakh crore.

European Commission President Ursula von der Leyen said, “The EU and India make history today, deepening the partnership between the world’s biggest democracies. We have created a free trade zone of 2 billion people, with both sides set to gain economically. We have sent a signal to the world that rules-based cooperation still delivers great outcomes. And, best of all, this is only the start – we will build on this success, and grow our relationship to be even stronger.”

As part of the agreement, tariffs will be reduced or eliminated on 96.6 per cent of EU goods exports to India, with the EU estimating that its goods exports to India could double by 2032.

This represents the most ambitious trade opening India has ever granted to a trading partner, offering EU companies preferential access to India’s market across key industrial and agri-food sectors.

Union Commerce and Industry Minister Piyush Goyal said, “India-EU Trade Deal, the Mother of All Trade Deals. India and the European Union ink a comprehensive Free Trade Agreement, marking a significant milestone in our economic engagement. The agreement will unlock opportunities across sectors, benefiting businesses and people, and contributing to growth and prosperity on both sides.”

The agreement is expected to boost exports from multiple Indian states, including Punjab, Rajasthan, Gujarat, Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Telangana, West Bengal, Assam and Uttar Pradesh.

Key beneficiary sectors include textiles and apparel, engineering goods, pharmaceuticals and medical devices, electronics, gems and jewellery, chemicals, marine products, leather and footwear, plastics and rubber, tea and spices, furniture, handicrafts, minerals, sports goods and agricultural products.

Under the auto sector provisions, the EU will receive tariff concessions on cars priced above Rs 25 lakh through a quota-based system. Import duties on such vehicles will fall to 30-35 per cent from the current range of 66 per cent to 110 per cent, with in-quota duties gradually reduced to 10 per cent over five years.

India’s export quota for cars will be 2.5 times that of the EU, with Indian cars receiving duty-free access. Import quotas for electric vehicles will begin in the fifth year to protect India’s domestic EV market.

The agreement will reduce EU tariffs to zero on several Indian exports, including marine products (26 per cent), chemicals (12.8 per cent), footwear (17 per cent), apparel (12 per cent), textiles (12 per cent), gems and jewellery (4 per cent), base metals (10 per cent), rail products and ships (7 per cent), consumer goods (10.5 per cent) and toys and sports goods (4.7 per cent).

For European exports to India, tariffs on machinery and electrical equipment (up to 44 per cent), aircraft and spacecraft (up to 11 per cent), plastics (up to 16.5%) and most chemicals (up to 22 per cent) will be phased down to zero over periods of up to 10 years.

Separately, EU High Representative for Foreign Affairs and Security Policy Kaja Kallas said, “When two major democracies act together, we build stronger shared security. It was a great pleasure to sign a new EU-India Security and Defence Partnership with Dr S Jaishankar today…”

The FTA marks a major expansion of India-EU economic, strategic and security cooperation at a time of shifting global trade dynamics.

Pankaj Mohindroo, Chairman, ICEA: “The finalisation of the India–EU Free Trade Agreement reflects the Hon’ble Prime Minister’s sustained leadership in positioning India as a globally competitive manufacturing and export economy. The agreement aligns directly with India’s shift from scale-led domestic manufacturing to export-oriented integration with global value chains, while promoting inclusive growth across regions and skill levels. In electronics, the FTA creates a credible pathway to build exports of nearly USD 50 billion by 2031 across electronic goods, including mobile phones, consumer electronics, and IT hardware, with the potential to exceed USD 100 billion in the following decade, anchored in manufacturing depth, job creation, innovation, and India’s emergence as a trusted global supplier.”

Paritosh Prajapati, CEO, GX Group: “The India–EU FTA brings together complementary strengths: India offers scale, speed, and manufacturing depth, while Europe contributes advanced design capability, technology collaboration, standards alignment, and predictable market access. When competence, IP, and supply chains integrate bilaterally, this partnership moves beyond trade volumes and becomes a long-term industrial growth platform for both economies.”

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