India-EU trade deal signed: Why it's a 'mother of all' agreements that has drawn US attention

“Overprotect of all” agreements is how the now-locked merchandise sell betwixt republic of india and the European Union (EU) is being branded, bringing international attention to the same which is expected to create a market of two billion people and account for nearly a fourth of global GDP (GDP) gross domestic product.Commerce secretary Rajesh Agrawal confirmed on Monday that negotiators of India and the EU have successfully concluded what he described as an “ambitious, balanced, forward-looking and mutually beneficial India-EU free trade agreement (FTA)”. Track latest developments in India-EU trade deal hereThe signing of India-EU trade deal was confirmed by Prime Minister Narendra Modi on Tuesday. The development appeared to have rattled the US, whose treasury secretary Scott Bessent on Monday doubled down on allegations that India's oil trade with Russia finances the war in EU-backed Ukraine.Why is the India-EU trade deal importantThe announcement on Tuesday, ending negotiations that were relaunched in June 2022 after a hiatus of almost nine years, paves way for an FTA which has been described as the “mother of all deals” as it would represent 25 per cent of the world’s gross domestic product and integrate a market of over 1.9 billion consumers, HT reported earlier.The EU is India’s biggest trade partner, with trade in goods worth $135 billion in 2023-24. The FTA will significantly boost trade between India and EU member states at a time when countries are focused on derisking amid trade disruptions caused by the policies of the President Donald Trump administration in the US.HT on January 24 reported that the “trade pact may allow duty-free access to over 90 per cent of Indian goods” in the vast EU market, which has 27 member countries, including, Germany, France, Italy, Spain and Belgium.Also Read | How to make the most of a trade deal with EUThe signing of the India-EU trade deal was announced amid European Council President Antonio Costa and Von der Leyen's two-day India visit. They were the chief guests at the Republic Day celebrations and later held a summit with Prime Minister Narendra Modi.The trade agreement is expected to remove tariff and non-tariff barriers on more than 90 per cent of Indian goods, with labour-intensive sectors such as textiles, leather, chemicals, electronics and jewellery expected to benefit the most as they do not compete with European manufacturers, as reported by HT on January 25.India’s exporters currently face tough competition from duty-free and quota-free shipments from least developed countries such as Bangladesh. “Once the proposed FTA is implemented, this duty disadvantage will end,” the earlier report quoted one person familiar with the matter as saying.A counterweight to Trump tariffsAnnouncing the signing of the trade deal, Prime Minister Narendra Modi said on Tuesday this agreement will bring major opportunities for the public in India and Europe."This is a perfect example of a partnership between two major economies of the world...This agreement represents 25 per cent of the global GDP and 1/3rd of global trade," he said.PM Modi said this agreement empowers our shared commitment towards democracy and rule of law."This Free Trade Agreement with the European Union will also complement Britain and EFTA's agreements...I congratulate the people of the nation for this," he said. The India-EU trade deal can be read as a strategic counterweight to Donald Trump's tariff-heavy approach that has left many nations affected, including India and the European Union countries.Donald Trump in August last year announced 25 per cent tariffs on Indian imports to the US and an additional “penalty” of the same amount over Russian oil purchase, taking the total duties to 50 per cent.For the EU, Trump imposed 25 per cent tariffs on steel and aluminum imports.In mid-2025, the US and EU agreed on a trade framework with a 15 per cent tariff on most EU goods entering the US, which was a compromise to avert a full-scale trade war and reduce the threat of even higher rates.