Historic deal: India, EU play their trump card

NEw new delhi : bharat and the European unification (EU) concluded a release merchandise agreement billed as the “mother of all deals”, with their leaders positioning commerce as a bulwark against protectionism and pledging to shore up a rules-based world order while expanding security and defence ties. Prime Minister Narendra Modi hosted European Council President Antonio Costa and European Commission President Ursula von der Leyen for the India-EU Summit a day after the 27-member bloc’s leaders served as chief guests at Republic Day celebrations – an honour reserved for India’s closest strategic partners.The EU will eliminate tariffs on 99% of Indian exports by value over seven years, with duties set to be cut away on $33 billion in labour-intensive goods including textiles, leather, footwear, gems and jewellery as soon as the pact is signed. India will cut tariffs on 96.6% of EU exports, with nearly one-third the reductions effective immediately when the pact becomes operational in early 2027, the remainder phased over five to 10 years.The pact comes as both sides seek to counter what von der Leyen called a world where “trade is increasingly weaponised” — a veiled reference to the Trump administration’s on-again, off-again tariff policies that have disrupted global commerce.“Today, India has concluded the largest free trade agreement in its history,” Modi said at a media interaction with the EU leaders, noting two-way trade totals €180 billion and over 800,000 Indians live in the EU region. “It is a happy coincidence that on this day, India is entering into this FTA with 27 countries of the EU,” he said, citing the date.The full text of the agreement will be published in mid-February, followed by legal scrubbing and translation, with formal signing expected in August.“This historic agreement will facilitate access to the European market for our farmers and small industries, create new opportunities in manufacturing, and further strengthen cooperation between our services sectors,” Modi said.Indian service companies secured access to 144 EU sub-sectors in the market segments while opening 102 to European providers, expanding opportunities in IT, professional services, education and business consulting, the government said separately.“This FTA will boost investment between India and the EU, create new innovation partnerships, and strengthen supply chains globally,” Modi added.Von der Leyen, who set the end-2025 deadline with Modi for concluding talks, said: “Prime Minister, distinguished friend, we did it. We delivered the mother of all deals. We are creating a market of two billion people. This is the tale of two giants, the world’s second and fourth largest economies, who choose partnership in a true win-win fashion, a strong message that cooperation is the best answer to global challenges.”The pact will cut €4 billion in annual tariffs for exporters and create jobs for millions of workers across India and Europe, she said.None of the leaders mentioned US trade policies directly, but all stressed the need for India and the EU to counter a global environment in flux. “The global order is in great turmoil today. In such a context, the partnership between India and the EU will strengthen stability in the international system,” Modi said in Hindi.Indian consumers stand to benefit as European car tariffs drop from 110% to 10% for 250,000 vehicles annually under calibrated liberalisation. Wine levies fall from 150% to 20-30%, spirits from 150% to 40%. EU machinery, pharmaceuticals and medical devices see substantial duty cuts.The EU is India’s largest trading partner, accounting for €120 billion in goods trade in 2024, or 11.5% of India’s total. Services trade reached €59.7 billion in 2023. Once ratified, the deal could boost Indian textile and jewellery exports hit by 50% US tariffs since last year. Negotiations launched in 2007 stalled in 2013 over what officials called a “gap in ambition” before resuming in June 2022.Formal signing is set for August 2026, with ratification to follow. The pact becomes operational early 2027, nearly two decades after talks began.Commerce minister Piyush Goyal said India accounts for just 1.5% of the EU’s $6.5 trillion in goods imports and 2.5% of nearly $3 trillion in services imports, highlighting scope for expansion.“With this massive opening up of opportunities, the EU has opened up many new sectors to us,” he said. “In marine products, almost 94% of tariff lines get duty-free access. In textiles, apparel, home furnishing, where India has serious labour-intensive interests, 100% of the European market will be open from day one.”Indian textiles currently face 12% EU tariffs, leather and footwear 17%, electronics 14% — all to be eliminated immediately upon implementation. These sectors alone represent $33 billion in current exports poised for substantial growth.On the EU’s Carbon Border Adjustment Mechanism, a contentious late-stage issue, commerce secretary Rajesh Agrawal said both sides will launch technical dialogue to ensure Indian industries retain market access despite CBAM regulations. “We will be working together to see that the verifiers for CBAM in India are accredited by EU’s agencies so that our industries are able to access [the markets]. We will work together to understand the technical processes through which CBAM measurement will be done in both economies,” he said. India secured commitment that any CBAM flexibility granted to other countries will automatically extend to India. Any future Indian carbon trading system will be integrated with EU regulations so Indian industry’s carbon costs are accounted for under CBAM.Beyond the trade pact, both sides signed a Security and Defence Partnership deepening cooperation in counter-terrorism, maritime and cyber security, and defence industrial collaboration for co-development and co-production of military hardware — timely as EU states revitalise defence capabilities amid eroding US security guarantees.They finalised a comprehensive mobility framework facilitating movement of Indian students, researchers and skilled workers. The EU will launch its first Legal Gateway Office in India as a one-stop hub supporting talent migration aligned with EU member state policies.A new roadmap, “Towards 2030: A joint India-European Union comprehensive strategic agenda,” guides partnership across five pillars: prosperity and sustainability, including trade and green transition; technology and innovation, including AI and semiconductors; security and defence; connectivity and global issues; and enablers including skills mobility and simplified Schengen visa procedures.Costa, who traces his roots to Goa and displayed his Overseas Citizen of India document at the interaction, said the summit sends a message that both sides “stand together as strategic and reliable partners” as the global order reshapes. “Trade agreements reinforce rules-based economic order and promote shared prosperity. That’s why today’s FTA is of historic importance – one of the most ambitious agreements ever concluded, creating a market of two billion,” he said. “As the two largest democracies in the world, we are working hand-in-hand to shape a resilient global order that underpins peace and stability, economic growth and sustainable development,” Costa added.The EU and India share responsibility for upholding international law with the UN Charter at its core, he said. “Cooperation between the EU and India will help shape a more balanced, resilient and inclusive global order.” The EU can count on Modi to help create conditions for peace in Ukraine through dialogue and diplomacy, he added.Modi said the Security and Defence Partnership strengthens commitment to a rules-based order. “The scope of our cooperation in the Indo-Pacific region will expand. Our defence companies will realise new opportunities for co-development and co-production.” Von der Leyen called the security pact a “landmark departure and trust-based platform” for cooperation to bolster mutual resilience. Beyond joint naval exercises against piracy, both sides will counter cyber and hybrid threats, pursue space security dialogue and negotiate a Security of Information Agreement.The leaders reaffirmed commitment to the India-Middle East-Europe Economic Corridor to strengthen connectivity. Modi said they will establish IMEC as a key pillar of global trade and expand trilateral projects from the Indo-Pacific to the Caribbean, supporting agriculture, clean energy and women’s empowerment.A joint statement expressed concern over the Ukraine war causing human suffering and global consequences, reiterating support for comprehensive, just and lasting peace through dialogue based on international law, sovereignty and territorial integrity.On Gaza, both sides backed implementing UN Security Council Resolution 2803 empowering the Board of Peace and called for durable peace, unhindered humanitarian access and a two-state solution. “The two sides discussed recent developments of concern in Iran and the region,” the statement said.Bharti Enterprises chairman Sunil Bharti Mittal said the FTA signals trust and stability in a shifting economic order. “This will open avenues for collaboration in digital infrastructure, space connectivity and secure networks, offering European investors compelling opportunities to scale with India for global markets.”Confederation of Indian Industry director general Chandrajit Banerjee called the deal a “strategic breakthrough” in India’s global trade engagement. Preferential access for over 99% of Indian exports “decisively improves competitiveness in the EU’s high-value market, anchors Indian manufacturers deeper into global value chains, and accelerates investment, technology inflows and scale.”“EU farmers may protest against agricultural imports from India,” Pranjul Bhandari, chief India economist strategist, ASEAN Economist and Simon Wells, chief European economist at HSBC said in a note.“The FTA still needs to be approved by the European Parliament (EP), which would take at least a year. Recently, the European Court did not approve the EU-Mercosur deal, which now awaits judgement by the EP,” they said.“Secondly, the EU’s carbon border levy could blunt some tariff gains for India, especially for sectors such as steel, although today’s press release mentions some flexibility has been secured. Either way, key sectors like pharma and textiles are relatively less carbon intensive,” they added