India-EU FTA: Modi, von der Leyen Finalise 'Mother of All Deals'

Prime Minister Narendra Modi and European Commission President Ursula von der Leyen on Monday jointly announced the conclusion of the long-negotiated India-European Union Free Trade Agreement (India-EU FTA), which is being seen as a landmark development for India’s global trade strategy. The announcement, made at the 16th India-EU Summit in New Delhi, marks one of India’s most significant trade breakthroughs in recent decades.

Modi said the agreement reflects the shared commitment of India and the European Union to open, predictable and inclusive trade. Von der Leyen called the Free Trade Agreement a major step forward in strengthening economic cooperation between the two partners.

The FTA was finalised after negotiations were relaunched in 2022, granting unprecedented duty-free access for more than 99 per cent of India’s exports to the European Union by trade value. The pact positions the EU and India, the world’s second and fourth largest economies, as long-term partners accounting for a combined 25 per cent of global GDP and nearly one-third of global trade.

The EU is one of India’s largest trading partners. In 2024-25, India-EU trade in goods reached Rs 11.5 lakh crore (USD 136.54 billion), while services trade climbed to Rs 7.2 lakh crore (USD 83.10 billion).

Major labour-intensive sectors are set to benefit from immediate tariff reductions under the FTA. Industries such as textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles will see duties of up to 10 per cent on USD 33 billion worth of exports fall to zero upon implementation.

The government expects the India-EU FTA to increase competitiveness, generate employment, spur MSME growth and integrate Indian businesses more deeply into global value chains.

Automobile Sector Liberalised

The pact includes a quota-based auto liberalisation framework that will allow European automakers to introduce more high-end vehicles into India while supporting potential “Make in India” manufacturing and future exports of EU-brand vehicles from India. Indian automobile exporters will also gain improved access to European markets.

Boost For Tea And Spices

Key agricultural products—tea, coffee, spices, fruits, vegetables and processed foods—will gain greater competitiveness in the EU market. India has safeguarded sensitive segments, including dairy, cereals, poultry, soymeal and select fruits and vegetables, through exemptions and protective measures.

The India-EU trade deal includes mechanisms to address long-standing non-tariff barriers through streamlined customs procedures, regulatory cooperation, and improved sanitary and phytosanitary (SPS) standards.

Under the EU’s Carbon Border Adjustment Mechanism (CBAM), India has secured commitments on technical cooperation, recognition of carbon pricing systems, mutual recognition of verifiers and access to financial assistance to help Indian companies meet emerging carbon compliance requirements.

Big Push To Services, Skilled Mobility And Digital Trade

The FTA provides commercially significant market access across 144 EU services subsectors, including IT, IT-enabled services, professional services, R&D, education, tourism and financial services. The EU will receive access to 102 subsectors in India.

A predictable mobility framework will ease business travel, short-term movement, intra-corporate transfers and family/dependent rights. The EU has granted mobility concessions for Contractual Service Suppliers in 37 sectors and Independent Professionals in 17 sectors—most aligned with India’s services strengths.

The agreement also establishes a roadmap for future Social Security Agreements and strengthens student mobility and post-study work options. Practitioners of Indian Traditional Medicine will be permitted to work in EU member states where their discipline is unregulated.

The FTA deepens cooperation on financial services, including secure cross-border digital payments, and strengthens TRIPS-aligned intellectual property protections. It recognises India’s Traditional Knowledge Digital Library and opens new avenues for collaboration in artificial intelligence, semiconductors and clean technology.

With this deal, the EU becomes India’s 22nd FTA partner. Since 2014, India has signed trade agreements with Mauritius, the UAE, the UK, EFTA nations, Australia and Oman, along with announcing its pact with New Zealand. Together, the India-EU, India-UK, and India-EFTA FTAs open the entire European market to Indian exporters.