New Delhi – India and the European Union have reached an agreement to finalize a free trade deal by the end of this year, marking a significant step forward in their long-standing negotiations. The announcement was made on Friday following talks between Indian Prime Minister Narendra Modi and European Commission President Ursula Von der Leyen in the Indian capital.
The talks between India and the EU have been ongoing for several years, but the recent threat of tariffs by U.S. President Donald Trump has added a sense of urgency to conclude the pact. As many countries are looking to diversify their partnerships in the wake of Trump’s policies, both India and the EU see this as an opportunity to strengthen their ties and increase access to markets outside the U.S.
Von der Leyen, who was accompanied by leaders from EU countries, referred to India as a “like-minded friend” and expressed her confidence in finalizing the free trade agreement. She stated that both sides have “tasked our teams to build on this momentum” and work towards a successful outcome.
Apart from trade, the two sides also discussed elevating their defense and security partnership. Prime Minister Modi highlighted the need for collaboration in areas such as trade, technology, investment, and security, and stated that they have prepared a “blueprint for collaboration” to achieve this.
Von der Leyen, before her meeting with Modi, emphasized the potential for India and the EU to be a defining partnership of this century and called for taking their strategic partnership to the next level.
In the current geopolitical climate, countries are looking to strengthen their partnerships, and analysts believe that India and Europe have the potential to do so. “For India, which is trying to navigate the turbulence unleashed by Trump, Europe emerges as a valuable partner,” wrote political analyst C. Raja Mohan in The Indian Express. He also added that while both India and Europe cannot afford to disengage from the U.S., they must work towards strengthening their ties in response to Trump’s unpredictable policies.
A free trade agreement between the EU and India would be the largest deal of its kind in the world, according to Von der Leyen. She also stressed the need to be pragmatic and ambitious in realigning priorities to suit the current realities.
The threat of tariffs by Trump has been a major factor in pushing India and the EU to conclude the deal. Trump has announced a 25 percent tariff on imports from the EU, and his plans for reciprocal tariffs will also affect Indian exports to the U.S.
The EU is currently India’s largest trading partner in goods, with bilateral trade amounting to over $130 billion in 2023-24. However, negotiations between the two sides have been stalled for eight years before resuming in 2021.
The main obstacles in the negotiations have been India’s reluctance to lower tariffs on key European imports such as cars, whiskey, and wine, while the EU has been hesitant to ease visa restrictions on Indian professionals. India is also seeking greater access to the EU for cheaper drugs and chemicals.
India, being the world’s fifth-largest economy with a large middle class, is seen as an attractive market, but its high protectionist barriers have been a concern for the EU. However, with the resumption of trade talks between India and the UK earlier this week, it is evident that India is taking steps to address these concerns. During a visit by British business and trade secretary Jonathan Reynolds to New Delhi, both countries expressed their aim to double bilateral trade in a decade. Reynolds also stated that securing a trade deal with India is a top priority for the UK government.
Trade analysts believe that there is a sense of urgency to seal trade pacts, considering the current global trade climate. “It seems there is a real intent on the part of India and other partner countries to do something this time. The timing is crucial – President Trump’s threat of tariffs can cause trade disruptions. So, I think countries want to conclude deals before the global mood changes from being relatively open to more protectionist,” said trade analyst Biswajit Dhar in New Delhi.
While India has faced challenges in clinching free trade pacts in the past, it is now stepping up efforts to conclude deals, especially with the fear of potential shifts in global trade posing a challenge to Prime Minister Modi’s goal of increasing exports to $1 trillion by 2030.
“The trade uncertainties unleashed by Trump’s tariffs will push the Indian government to closely examine the levels of protection in the country.
