An EU-India Free Trade Agreement was completed and signed on Tuesday in New Delhi, with European Commission President Ursula von der Leyen describing it as the "mother of all trade agreements". The agreement creates a free trade zone for 2 billion people, after negotiations that began in 2007, were suspended in 2013 and restarted in 2022.
The signing took place in the context of the 16th EU-India Summit, which also endorsed the Partnership on Security and Defence, further strengthening the strategic depth of bilateral relations. Von der Leyen and European Council President Antonio Costa had previously participated, as guests of honour, in the celebrations for India's 77th Republic Day, the first time for an EU leadership.
"In an increasingly volatile world, Europe chooses cooperation and strategic partnerships," von der Leyen said, underlining that the agreement provides for a drastic reduction in tariffs and opens up new opportunities for trade and investment.
The new agreement significantly reduces tariff and non-tariff barriers, saving around €4 billion in tariffs for exporters. Around 6,000 European companies are currently active in India, a number that is expected to rise. The framework includes sustainable development clauses and predictable rules, enhancing the security of supply chains and trade diversification.
On the sidelines of the Summit, von der Leyen and Prime Minister Narendra Modi participate in the first EU-India Business Forum, with the aim of strengthening private cooperation.
Particular importance is attached to the Partnership on Security and Defence, which provides for closer cooperation in areas such as maritime security, non-proliferation, space, cybersecurity, hybrid threats and counter-terrorism. At the same time, negotiations are underway for a classified information exchange agreement, paving the way for India's participation in EU security initiatives.
The two sides are also strengthening cooperation in critical technologies, innovation and research, with the establishment of EU-India Innovation Hubs and the launch of a Startup Partnership. The Scientific and Technological Cooperation Agreement was renewed until 2030 and exploratory talks were launched to associate India with Horizon Europe.
In the area of mobility and skills, a comprehensive framework facilitating the movement of skilled workers, young professionals and seasonal workers has been adopted, and the first European Legal Gateway Office is being established in India to inform workers, students and researchers.
Finally, leaders endorsed the EU-India Strategic Agenda to 2030, reaffirming cooperation on climate transition, green energy, circular economy and Europe-Indo-Pacific connectivity, as well as joint actions in third countries. The Summit is described as a milestone that lays the foundations for one of the most decisive strategic partnerships of the 21st century.
Reuters also points out that the EU is among India's top trading partners, along with the United States and China, with total bilateral trade in goods and services exceeding $190 billion in 2024/25. India exported about $76 billion in goods and $30 billion in services to the Union of 27 states.
The EU's average tariffs on Indian goods are relatively low, around 3.8%, but labour-intensive sectors such as textiles and garments face tariffs of around 10%, according to the Global Trade Research Initiative, a Delhi-based think tank.
EU exports to India face much higher hurdles today, with an average weighted duty of around 9.3% on goods worth $60.7 billion in 2024/25.
India's tariffs are particularly high on cars, auto parts, chemicals, and plastics. Tariff reductions through the agreement will create export opportunities for European cars, machinery, aircraft and chemicals, while improving access to services, supplies and investment.
Already yesterday it became known that India plans to reduce tariffs on cars imported from the European Union to 40% from the current 110%, as the two sides approach a free trade agreement, which is possible to conclude tomorrow Tuesday.
Prime Minister Narendra Modi's government has agreed to immediately reduce the tax on a number of cars from the EU, with an import price of more than €15.000, two sources briefed on the talks told Reuters.
The rate will further decrease to 10% over time, they added, making it easier for European automakers like Volkswagen, Mercedes-Benz and BMW to access the Indian market.
Agricultural and dairy products are excluded
It is interesting to note that agricultural and dairy products (which, as far as the agreement with the Mercosur countries is concerned, caused the anger of European farmers) are excluded from the EU-India agreement. India has not agreed to the elimination of tariffs on more than 95% of goods and is considering gradual reductions or limited quotas instead of abrupt tariff reductions, citing risks to domestic production.
Two major concerns are the EU's carbon border tax, which could soften tariff gains for Indian exporters, and high non-tariff barriers such as regulatory delays, strict standards, and certification costs.
The agreement is not exclusively commercial in content, as it also covers joint defence and security initiatives, cooperation on maritime security, cybersecurity and counter-terrorism and structured policy dialogue on strategic issues.
