Mother of all deals - India and the EU on the Brink of a Landmark Trade Pact

• India–EU FTA, negotiated since 2007, is close to conclusion during the January 27 summit.

• The pact links markets of nearly two billion people, earning the tag “mother of all deals.”

• It aims to boost trade, investment and supply-chain resilience amid global disruptions.

• Key gains include market access, export growth, services expansion and strategic diversification.

As New Delhi readies itself to welcome the European Union’s highest leadership for India’s 77th Republic Day celebrations and the 16th India–EU Summit on January 27, expectations are mounting around a deal that has been nearly two decades in the making. The long-stalled India–EU Free Trade Agreement (FTA), officially known as the Broad-based Trade and Investment Agreement (BTIA), could finally be sealed during the visit of European Council President Antonio Costa and European Commission President Ursula von der Leyen. If that happens, the agreement would represent a major economic and strategic milestone, not only for India and Europe but also for the wider global trading order.

Commerce and Industry Minister Piyush Goyal has summed up the ambition behind the pact by calling it the “mother of all deals.” His remark reflects both the sheer scale of the proposed agreement and its broader symbolism. With a combined consumer base approaching two billion people, the FTA would bind two of the world’s largest democratic economies at a time when global trade is becoming more fragmented and inward-looking.

A negotiation nearly 20 years in the making

Discussions on an India–EU trade pact began in 2007, driven by a shared sense that the two economies could complement each other. Between 2007 and 2013, negotiators met for multiple rounds, but progress was slow and ultimately stalled. Sharp disagreements emerged over tariff reductions, market access, intellectual property rights, labour and environmental standards, and rules governing public procurement.

Specific flashpoints included India’s steep import duties on automobiles and alcohol, European demands for stronger intellectual property protections, and concerns among Indian technology firms about data security and regulatory barriers. By 2013, these unresolved issues had pushed the talks into limbo.

Efforts to revive the negotiations between 2016 and 2020 produced little momentum. The turning point came after 2020, when the Covid-19 pandemic and rising geopolitical tensions exposed the fragility of global supply chains. Against this backdrop, India and the EU formally restarted negotiations in June 2022, broadening the agenda to include not just a free trade agreement but also an Investment Protection Agreement and a deal on Geographical Indications. Talks gathered further pace following Ursula von der Leyen’s visit to India in February 2025, and officials now suggest that only a few contentious points remain.

Why the moment is critical

The renewed push for an agreement is closely linked to upheavals in global trade. Higher tariffs imposed by the United States have disrupted established trade routes, with some Indian exports reportedly facing duties of up to 50 per cent. In this environment, deeper access to the European market—already India’s largest trading partner—has become increasingly important.

Trade between India and the EU touched €120 billion (about $140 billion) in 2024. The bloc accounts for roughly 17 per cent of India’s exports, while India represents about 9 per cent of the EU’s external trade. With trade talks between India and the United States making little headway and China increasingly viewed as a strategic vulnerability, an India–EU FTA offers both sides a way to diversify markets and strengthen supply-chain resilience.

For the EU, the deal aligns with a broader strategy of strengthening economic ties with major emerging economies, following recent agreements with countries such as Mexico and Indonesia. For India, it fits into a more proactive trade policy that has seen New Delhi conclude or advance agreements with partners including Australia, the UAE, the UK, EFTA nations, Oman and New Zealand over the past decade.

The core economic trade-offs

At its core, the proposed FTA is about reciprocal market access, though both sides are approaching liberalisation cautiously. The EU has been pressing India to significantly cut import duties on automobiles—currently among the highest in the world—as well as on medical devices, wines, spirits and certain meat products. India, for its part, remains wary of opening sectors it considers economically sensitive or politically delicate.

According to officials cited in media reports, automobiles and steel are among the toughest issues still on the table. European carmakers are seeking greater access to the Indian market, while New Delhi is concerned that its steel exports could be affected by the EU’s carbon border adjustment mechanism and safeguard measures that cap steel imports.

Agriculture is another area of sensitivity. Indian policymakers have consistently maintained that the country cannot fully liberalise its agriculture or dairy sectors, given the dependence of millions of small farmers on these industries. However, reports suggest the final agreement may include limited agricultural concessions while excluding products that could threaten domestic livelihoods, pointing to a calibrated compromise rather than an all-or-nothing approach.

Opportunities for Indian exporters and service providers

For India, some of the most tangible benefits would come from improved access to European markets for labour-intensive goods. Reduced or zero tariffs could boost the competitiveness of Indian textiles, garments, leather products, pharmaceuticals, steel, petroleum products and electrical machinery.

Textiles are a particularly important case. Indian exporters currently face EU tariffs of 12–16 per cent, leaving them at a disadvantage compared with competitors such as Bangladesh and Vietnam, which enjoy preferential access. An FTA could help level that playing field.

Services trade is another key pillar of the negotiations. Indian exports of IT, business services, telecommunications and transport services to Europe are expected to rise if the agreement delivers clearer rules and fewer regulatory hurdles. Faster recognition of Indian standards in sectors such as electronics and automobiles could also help Indian firms integrate more deeply into European value chains.

What Europe hopes to gain

From the European perspective, the agreement would unlock greater access to India’s vast and still relatively protected consumer market of more than 1.4 billion people. European exporters stand to benefit in areas such as aircraft and components, electrical machinery, chemicals, diamonds and high-end manufactured goods. Service providers in fields like intellectual property, IT, telecommunications and professional services could also gain

from more predictable regulations and stronger investment safeguards.

Alcohol trade highlights the imbalance the EU wants to address. While Indian exports of wines and spirits to Europe are minimal, EU producers already export significant volumes to India despite steep tariffs. Even modest tariff reductions could substantially expand European sales in this segment.

Beyond tariffs and trade flows

The agreement is also expected to deepen two-way investment. The EU is one of India’s largest sources of foreign direct investment, with cumulative inflows of $117.4 billion between April 2000 and September 2024, accounting for around 16.6 per cent of total FDI equity inflows. Approximately 6,000 European companies operate in India, with the Netherlands, Germany and France among the leading investors.

An FTA could further encourage European investment in Indian manufacturing, renewable energy, digital infrastructure and green technologies. At the same time, Indian firms—which have invested more than $40 billion in the EU since 2000—would benefit from greater certainty and improved market access.

Sustainability remains one of the more complex dimensions of the talks. The EU insists on adherence to international labour and environmental standards, including commitments under the Paris climate accord. Reconciling these expectations with India’s development priorities has required careful negotiation.

A pact with wider global resonance

If finalised, the India–EU FTA would go well beyond a conventional bilateral trade deal. It would signal that large, diverse economies can still reach comprehensive agreements despite protectionist pressures and geopolitical strains. By connecting one of the world’s largest consumer markets with its biggest trading bloc, the pact could influence global trade patterns and set new benchmarks in areas such as digital trade, investment protection and sustainable growth.

As Commerce Secretary Rajesh Agrawal has noted, the negotiations are now “very close” to completion. Whether or not a formal announcement is made during the January summit, the shape of the agreement already explains why it has earned the label of the “mother of all deals”—a partnership whose economic and strategic impact would extend far beyond India and Europe.