India and the EU have struck a landmark trade deal after two decades of negotiations

India and the European Union have announced a landmark trade deal, ending nearly 20 years of stalled negotiations as both sides seek to deepen economic ties amid growing global trade tensions.

“This is the mother of all agreements,” said Ursula von der Leyen at a press conference in Delhi, with Narendra Modi describing the agreement as “historic”.

The agreement will enable free trade of goods between the 27 EU member states and the world’s most populous country, accounting for around 25 percent of the world’s GDP and a combined market of around two billion people. It is expected to significantly lower prices, improve market access and strengthen bilateral procurement coordination.

Von der Leyen and António Costa were in Delhi for a bilateral meeting with Modi, where the agreement was finalized before being formally ratified later this year by the European Parliament and the Council of Europe.

Under the agreement, tariffs will be removed or slightly reduced on EU exports of chemicals, machinery and electronics, as well as aircraft and spacecraft. Most importantly for European car makers, car jobs, currently at 110 percent, will be reduced to 10 percent below the average of 250,000 vehicles. That quota is six times larger than the 37,000-unit allowance given to the UK under its trade deal with India signed last July, according to Bloomberg.

For India, the agreement will give “special access” to the EU for almost all exports, with textiles, leather goods, marine products, handicrafts, gems and jewelery among the major beneficiaries. Tariffs will be reduced or removed on goods such as tea, coffee, spices and processed foods, although Delhi has said it has protected sensitive sectors including milk, grains, poultry, soy foods and certain fruits and vegetables.

Both sides said the agreement will improve the flow of investment, deepen manufacturing and service links and improve access for small businesses. A harmonized travel framework will ease temporary travel restrictions for professionals traveling between India and the EU.

“This is India’s biggest free trade agreement,” Modi said. “It will make access to European markets easier for our farmers and small businesses, increase production and services, and strengthen new relationships.”

The agreement comes in a tense political environment. India is still facing a 50 percent tariff imposed by Donald Trump last year, while negotiations on a US-India trade deal are ongoing. The EU also faced pressure from Washington, including recent threats over Greenland, before the US president stepped down.

Von der Leyen framed the deal as a strategic response to those pressures. “This is a story of two giants, the second and fourth largest economies in the world, choosing a relationship in a really effective way,” he said, calling it “a strong message that cooperation is the best answer to global challenges”.

Costa added that the deal sent “an important political message” at a time when protectionism is rising and “some countries have decided to raise prices”.

Beyond trade, India and the EU are also moving forward with discussions on security, defense and climate cooperation. India’s defense minister Rajnath Singh said discussions with Kaja Kallas covered defense supply chains, maritime security and cyber threats. A draft security and defense partnership is progressing, according to Reuters.

The EU is already India’s biggest trading partner in goods, with bilateral trade in goods set to reach $136bn (£99.4bn) by 2024-25 – almost double the level of a decade ago. Negotiations for a free trade agreement began in 2007 but were suspended in 2013 over market access and regulatory issues, before officially resuming in July 2022.

The breakthrough comes as Delhi and Brussels look to secure some export markets. India has signed major trade agreements in recent years with the UK, Australia, Oman and New Zealand, while an agreement with the European Free Trade Association came into effect last year. Meanwhile, the EU finalized a long-awaited trade deal with Mercosur earlier this month after 25 years of negotiations.

The official signing of the India-EU agreement is expected later this year, once the legalization process on the European side is completed.