India and the European Union recently wrapped up a significant free trade agreement, which Indian Prime Minister Narendra Modi called the “mother of all deals.” This partnership, impacting around 2 billion people, comes at a time when global trade is under pressure from rising geopolitical tensions.
The EU represents about 25% of the world’s GDP and a significant portion of global trade, making this agreement a crucial step for India. During his speech at the India Energy Week, Modi expressed pride in the sectors that will benefit, like textiles, gems and jewelry, and leather. He emphasized that this deal, finalized at the long-anticipated India-EU summit in New Delhi, could provide much-needed support to these industries.
Negotiations have been ongoing for nearly two decades and were relaunched in 2022. Reasons for the lengthy process include sensitive topics such as agriculture and automotive manufacturing. According to Hosuk Lee Makiyama, director of the European Centre for International Political Economy, both India and the EU have historically leaned towards protectionist policies.
With the U.S. and China currently not open to trade deals, this agreement seems especially vital. It’s part of India’s broader strategy to diversify its trading partners after facing significant tariffs from the U.S. last year—tariffs that hit Indian exports hard. Following the introduction of these tariffs, India struck deals with other nations, including the U.K., Oman, and New Zealand.
In numbers, trade between India and the EU exceeded 120 billion euros (around $140 billion) in 2024, establishing the EU as India’s largest trading partner. Key exports from India to the EU include machinery, textiles, and chemicals. However, India remains the ninth-largest trading partner for the EU, making up only 2.4% of its total trade—much smaller compared to major partners like the U.S. and China.
The European Commission has expressed a commitment to “fair trade over tariffs,” focusing on partnership and sustainability. Although this new agreement is a major step for India, analysts caution that it doesn’t diminish the necessity of a trade deal with the U.S., where India’s trade surplus was notably larger at $45.8 billion in 2024 compared to $25.8 billion with the EU.
This strategic move aligns with a broader global trend where countries are seeking new alliances amid shifting economic landscapes. As international trade continues to evolve, India’s approach may serve as a blueprint for other nations facing similar challenges.
For further details, you can check the European Commission’s official data.
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