The European Union and India are on the verge of signing a "historic trade agreement" that could create a market of two billion people, accounting for almost a quarter of the global GDP. European Commission President Ursula von der Leyen announced this at the World Economic Forum in Davos on Tuesday. The EU views India as a key partner in its strategy to diversify trade relationships and reduce reliance on any single country.
Von der Leyen stated that the agreement, sometimes called "the mother of all deals," would give Europe a "first-mover advantage" in one of the world's fastest-growing and most dynamic continents. She emphasized the EU's commitment to engaging with growth centers and economic powerhouses globally, declaring that "Europe will always choose the world, and the world is ready to choose Europe".
The announcement comes days before von der Leyen and European Council President Antonio Costa are scheduled to visit India from January 25 to 27. They will attend India's Republic Day celebrations as chief guests and hold summit talks with Prime Minister Narendra Modi. The two sides are expected to formally announce the conclusion of FTA negotiations at the India-EU summit on January 27.
Negotiations for the India-EU free trade agreement (FTA) were initially launched in 2007 but suspended in 2013 due to a gap in ambition. Talks were relaunched in June 2022, with renewed political will on both sides. Besides the FTA, India and the EU are also expected to unveil a defence cooperation framework and a joint comprehensive strategic vision to guide ties from 2026 to 2030.
The EU is currently India's largest trading partner, with bilateral trade in goods reaching $135 billion in the financial year 2023-24. A formal agreement is expected to unlock much larger potential, especially in emerging sectors like clean energy, pharmaceuticals, advanced manufacturing, and digital services. The trade negotiations aim to remove barriers and help EU firms, especially smaller ones, to export more. They also seek to open up services and public procurement markets, ensure the protection of geographical indications, and pursue ambitious commitments on trade and sustainable development.
While India aims to gain market access in labor-intensive sectors like textiles, footwear, gems, and jewelry, the EU is expected to gain market access for its automobiles and beverages.
Despite the optimism, some hurdles remain. European negotiators are pushing for deeper tariff cuts on automobiles, wines, and spirits, while India is seeking more favorable conditions for the movement of skilled professionals. Questions around sustainability standards, public procurement access, and regulatory harmonization also remain open.
