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India and the EU are set to announce on Tuesday what New Delhi has described as the “mother” of all its recent trade deals, a historic agreement intended to reduce the reliance of both parties on the US and China.
The EU said the deal, sealed during a visit to India by European Commission president Ursula von der Leyen and European Council president António Costa, would “open markets, remove barriers and strengthen critical supply chains in clean technologies, pharmaceuticals and semiconductors”.
Tariffs imposed by US President Donald Trump on goods from India and the EU have spurred them to complete negotiations that they began almost two decades ago.
The agreement, which is expected to slash tariffs on most EU exports to India, comes as “the rules-based international order is under unprecedented pressure”, Commission vice-president Kaja Kallas said last week.
“We are aiming at substantially reducing tariffs on both sides,” one European official said ahead of the announcement. Another said it would “help diversify supply chains and reduce unwanted dependencies”.
The deal will still need to be approved by the European parliament and India’s cabinet.
Indian Prime Minister Narendra Modi is trying to modernise the economy of a country notorious for its determination to defend its domestic market.
India, the world’s fastest-growing major economy, has some of the highest tariffs in the world, including levies of more than 100 per cent on important EU exports such as cars, spirits and certain meat products.
Modi’s government has recently signed trade pacts with Australia, the UK, New Zealand and the European Free Trade Association of non-EU members, but has been struggling to conclude negotiations with the US.
India’s trade minister Piyush Goyal said this month that he had completed seven trade deals with developed countries and “this one will be the mother of all”.
However, the EU has had to lower its expectations for access to the vast Indian market and the deal has few provisions on environmental and labour standards. The two sides will continue talks in those areas, according to a senior European official.
Dairy had been excluded from the agreement, Indian and EU officials said, but European officials said wine, spirits and oils were expected to be included.
India and the EU will also unveil a defence pact that Brussels hopes will tilt India away from its close ties to Russia.
For Brussels, the trade deal comes at a sensitive time. EU lawmakers recently voted to postpone ratification of a trade agreement with the Mercosur group of South American economies that has long been opposed by European farmers.
Ajay Srivastava of the Global Trade Research Initiative, a New Delhi-based think-tank, said the “free trade agreement” would be India’s “largest in both economic size and regulatory scope”.
“The FTA is being finalised at a time of rising protectionism, geopolitical fragmentation and growing use of trade as a strategic tool,” Srivastava said, adding that India would gain market access, tariff relief for labour-intensive exports and new opportunities in services.
The EU is India’s largest trading partner in goods, with bilateral trade worth about $136bn in the year to the end of March 2025, according to the Indian government. Indian services exports to the EU were worth €37bn in 2024, up from €19bn in 2019 as Indian software companies and outsourcers expand in Europe.
Madhavi Arora, chief economist at Emkay Global Financial Services in Mumbai, estimated the deal could lift India’s exports to the EU by $50bn by 2031, led by medium-tech manufactured goods.
India and the EU, which together account for nearly 2bn people, almost a quarter of the world’s population, began trade negotiations in 2007, but the talks foundered in 2013 and only restarted in 2022.
Srivastava said the EU’s landmark new carbon border adjustment mechanism could “dilute the benefits of tariff liberalisation” for India.
The CBAM tax, which came into force on January 1 and covers steel, cement and aluminium, has been a bone of contention for India. The FT has reported that the EU has refused to exempt India from it.
Additional reporting by Chris Kay in Mumbai