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India and the European Union announced Tuesday, January 27 the "mother of all deals," a huge trade pact to create a market of two billion people, reached after two decades of negotiations. EU chiefs and Prime Minister Narendra Modi hope the pact will help shield against challenges from the world's two leading economies, the United States and China. The agreement will cut or eliminate tariffs on almost 97% of European exports, saving up to €4 billion ($4.75 billion) annually in duties, the 27-nation bloc said.
"A mother of all deals," Modi said Tuesday in the capital New Delhi, where he met with European Commission President Ursula von der Leyen and European Council President Antonio Costa.
"This deal will bring many opportunities for India's 1.4 billion and many millions of people of the EU," Modi said, adding the agreement "represents about 25% of global GDP, and one-third of global trade."
The EU has eyed India – the world's most populous nation – as an important market for the future. "Europe and India are making history today," von der Leyen said in a statement, a day after she and Costa were feted as guests of honor at India's Republic Day parade. "We have created a free trade zone of two billion people, with both sides set to benefit."
EU officials said the deal was the most ambitious India had ever signed, and European companies would benefit from the so-called "first mover advantage." Europe's key agricultural, automotive and service sectors stand to gain. But sensitive agricultural sectors, such as beef, rice and sugar, whose inclusion in an earlier deal struck with South American bloc Mercosur sparked farmers' anger in Europe, were left out of the agreement.
'Highest level of access'
New Delhi sees the European bloc as an important source of much-needed technology and investment to rapidly upscale its infrastructure and create millions of new jobs. Bilateral trade in goods reached €120 billion ($139 billion) in 2024, an increase of nearly 90% over the past decade, according to EU figures, with a further €60 billion ($69 billion) in trade in services. Under the agreement, India is expected to ease market access for key European products.
Tariffs on cars will be gradually lowered from a top rate of 110% to as low as 10%, while duties on wines progressively go down from 150% to as low as 20%. Currently at 50%, tariffs on processed foods – including pasta and chocolate – will be eliminated, according to the EU.
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Von der Leyen said she expected exports to India to double, and that the EU would "gain the highest level of access ever granted to a trade partner in the traditionally protected Indian market." European firms will get privileged access to the Indian financial services and maritime transport market, the bloc said.
For India, it would boost sectors including textiles, gems, jewelry and leather goods, as well as the service sector, Modi said. Talks went down to the wire on Monday, focusing on a few sticking points, including the impact of the EU's carbon border tax on steel, according to sources familiar with the discussions.
'Clear choice'
The accord comes as both Brussels and New Delhi have sought to open up new markets in the face of US tariffs and Chinese export controls. India and the EU were also expected to conclude an accord to facilitate movement for seasonal workers, students, researchers, highly skilled professionals and a security and defense pact.
"We are not only making our economies stronger– we are also delivering security for our people in an increasingly insecure world," von der Leyen said, speaking alongside Modi after exchanging agreements. "By combining these strengths, we reduce strategic dependencies, at a time when trade is increasingly weaponized," she added.
Germany welcomed the trade agreement, saying it could support growth at a time of increasingly challenging ties with other major economies. "This agreement creates new opportunities for growth and good jobs in Europe and India alike while deepening the strategic partnership with the world's largest democracy," said Lars Klingbeil, Germany's finance minister and also vice chancellor of Europe's biggest economy.
India is on track to become the fourth-largest economy this year, according to International Monetary Fund projections. New Delhi, which has relied on Moscow for key military hardware for decades, has tried to cut its dependence on Russia in recent years by diversifying imports and pushing its own domestic manufacturing base. Europe is doing the same with regard to the United States.
Le Monde with AFP