India and European Union have closed a ‘landmark’ free trade deal, Prime Minister Modi says

India and the European Union signed a ‘landmark’ free trade agreement on Monday, referred to as the ‘mother of all agreements’, Prime Minister Narendra Modi said in his speech at the India Energy Week on Tuesday.

FTA signed Modi said the agreement with the EU, which represents about 25 percent of global GDP and about a third of global trade, will also complement India’s agreements with the United Kingdom and the European Free Trade Association.

The deal will create a market of 2 billion people at a time when trade relations are being tested amid rising geopolitical tensions.

“I congratulate our colleagues associated with every sector such as textiles, precious stones and jewellery, leather and shoes. I will prove that this agreement will be very supportive to these sectors,” Modi said in his speech in Hindi, translated by CNBC. he said.

Modi and EU President Ursula von der Leyen are expected to make a joint statement at the India-EU summit in New Delhi later in the day, revealing the details of the agreement that has been in the making for nearly two decades.

This deal could be a much-needed opportunity for New Delhi, which is facing the burden of punitive US tariffs. Since Trump imposed a 50 percent tariff on the Asian economy in August last year, it has been looking for alternative markets for its exports and making trade agreements with many countries.

This is India’s fourth major trade deal since the United States, India’s largest export market and a key trading partner, imposed high tariffs in August. England signed trade agreements with Oman and New Zealand.

According to European Commission data, the amount of goods traded between India and the EU in 2024 exceeded 120 billion euros (about $140 billion), making the bloc New Delhi’s largest trading partner. Machinery and equipment, chemicals, base metals, mineral products and textiles are among New Delhi’s top exports to the bloc.

India is the EU’s ninth-largest trading partner, accounting for 2.4% of the bloc’s total goods trade in 2024, far behind major partners such as the US (17.3%), China (14.6%) or the UK (10.1%). EU’s major exports to India include machinery and equipment, transport equipment and chemicals.

European Commission President Ursula von der Leyen told the World Economic Forum in Davos on January 20 that the bloc was focused on “choosing fair trade over tariffs, partnership over isolation, sustainability over exploitation.”

India’s total exports to the six major EU markets (Netherlands, Germany, Italy, Spain, France and Belgium) were $43.8 billion in the 9 months to the end of December, while in the USA alone the figure was $65.88 billion.

Although India’s agreement with the EU is an important milestone, it will not replace the need for an India-US agreement, experts said.

While India’s goods trade surplus with the USA in 2024 was 45.8 billion dollars, this figure for the EU was quite low at 25.8 billion dollars.