India and the European Union have agreed on a free trade agreement, Prime Minister Narendra Modi said on Tuesday, capping nearly two decades of negotiations at a time of strained ties with Washington.
“This free trade agreement will strengthen confidence of investors, business in India,” Modi said in remarks at an energy event. He added that the pact will strengthen trade and global supply chains while boosting India’s manufacturing and services sectors.
European Commission President Ursula von der Leyen and European Council President Antonio Costa are in New Delhi to formally announce the deal later on Tuesday.
The agreement would lower tariffs on most consumer and industrial goods traded between India and EU members, although it’s expected to exclude some agricultural products. The EU would also get enhanced market access for its car exports subject to a cap.
The pact is expected to be formally signed after legal vetting, which will likely take around six months. The European Parliament will also have to ratify it.
Modi’s announcement comes weeks after India signed trade deals with New Zealand and Oman. Just days earlier, the EU finally polished off a separate, long-gestating trade deal with the Mercosur bloc of South American countries. EU lawmakers have yet to ratify that deal, however.
Tuesday’s agreement marked Modi’s fourth trade deal since last May, following pacts with the UK, Oman and New Zealand.
Next up, Modi is seeking partnerships with the Mercosur bloc, Chile, Peru and the Gulf Cooperation Council, hoping to secure strategic resources and increase India’s global footprint.
Export boost
The EU-India deal could give India, Asia’s third-largest economy, a competitive edge in the export of labor-intensive goods hit hard by US President Donald Trump’s sky-high tariffs, including apparel and footwear.
More broadly, it could boost the country’s exports to the EU roughly $50 billion (€42.2 billion) by 2031, according to a report by Madhavi Arora, lead economist at Emkay Global Financial Services Ltd. Arora singled out pharmaceutical, textiles and chemicals as sectors likely to benefit.
For the EU, the agreement would mean access to one of the world’s fastest growing economies, with a market of over 1.4 billion people. But the deal will not offer as much market access for European goods as the one the EU recently reached with the Mercosur countries — Argentina, Brazil, Uruguay and Paraguay.
Still, “in a world where the transatlantic relationship is fundamentally broken and trusted partners are hard to come by, this is a pretty big win for the EU,” said Garima Mohan, an Indo-Pacific specialist who focuses on EU-India ties at the German Marshall Fund. “It signals the EU’s shift to a more geopolitical, pragmatic stance.”
Bilateral trade between the EU and India stood at $136.5 billion in India’s fiscal year through March 2025, with the EU making up more than 17 percent of India’s total exports, official data showed. Conversely, India is the EU’s ninth largest trading partner.
Security partnership
The EU and India are also growing closer on the defense front, recently unveiling a new security partnership.
The agreement mostly offers a political signal — part of an EU effort to expand its alliances as Trump rattles the transatlantic bond. The EU has struck similar deals recently with countries like the UK and Canada.
The two sides vowed to tighten defense industry cooperation and officials also opened the door to more maritime security cooperation and possible joint naval exercises.