2 billion people, 25% of world’s GDP: What makes India-EU trade pact the ‘mother of all deals

India’s Republic Day will have more shine this year. The 77th Republic Day celebrations will be even more significant this year, as India is on the cusp of signing what is being deemed as the “mother of all trade deals” with the European Union (EU), after nearly two years of negotiations.

Expected to be signed next week, the India-EU free trade agreement (FTA) comes at a time when the United States, under President Donald Trump, is upending old and established global alignments, allowing Europe to position itself as a predictable alternative to the unpredictability stemming from the White House.

Speaking on the trade deal at the World Economic Forum in Davos, European Commission President Ursula von der Leyen said that negotiations between India and the EU are approaching a significant phase and that the two sides are “on the cusp of a historic trade agreement” that could reshape global commerce and supply chains.

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“And right after Davos, the next weekend, I will travel to India. There is still work to do, but we are on the cusp of a historic trade agreement,” said von der Leyen, adding that “some call it the mother of all deals”.

Fresh from #WEFDavos:

"we are on the cusp of a historic trade agreement. Some call it the mother of all deals. One that would create a market of 2 billion people.." President @vonderleyen

President @antoniocostapm & @vonderleyen will visit India Jan 25-27. 🇪🇺🤝🇮🇳#EUIndia pic.twitter.com/JeET60BwwS

— EU in India (@EU_in_India) January 20, 2026

But what makes this trade pact so significant? Here’s what you need to know.

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India-EU trade deal: Years in the making

If all goes as planned and the trade deal sees its conclusion during the Republic Day celebrations, it would make India’s 19th trade agreement and one of its most consequential considering the EU’s position. Since 2021, India has been on a FTA spree — it has signed deals with the UAE, Australia, New Zealand, the EFTA bloc and the UK.

However, the road to get here has been long and winding. Talks on an India-EU Free Trade Agreement began back in 2007 with both sides initially calling it the Broad Based Trade and Investment Agreement (BTIA).

Between 2007 and 2013, multiple rounds of negotiations were held. However, the process stalled owing to disagreements on market access, tariffs, intellectual property rights, labour and environmental standards, and other issues.

After a hiatus, negotiations were relaunched in 2022 with renewed political will to conclude a comprehensive FTA.

Talks gained urgency after Donald Trump returned to the White House for a second term, and changed its trade policies, ramping up protectionist measures, forcing trade partners to explore newer markets.

Negotiations further received acceleration following von der Leyen’s visit to India last February, with Commerce Secretary Rajesh Agarwal noting last week that India has made considerable progress in its trade deal negotiations with the EU, with the two sides signing as many as 20 of the 24 chapters and aiming to reach a deal before the EU leaders’ visit later this month.

India-EU FTA: Scale and size matters

When concluded — hopefully next week — the India-EU FTA would be India’s largest and most complex trade agreement to date, spanning goods, services and trade rules across the EU’s 27-member customs union. It’s exactly for this reason that India’s Commerce Minister Piyush Goyal has described it as the “mother of all deals”. “I have done seven deals so far. All with developed economies. This one will be the mother of all,” he said a few days ago.

But what’s the scale of this deal? The numbers reveal it all. Together, India and the 27-nation EU would create a combined market of nearly two billion people. Additionally, it would represent close to 25 per cent of the world’s GDP. As of today, no other trade deal under negotiation matches this size or economic breadth.

The agreement is expected to cover goods, services, investment, technology transfer and regulatory cooperation, helping integrate India more deeply into European supply chains while giving EU firms wider access to one of the world’s fastest-growing major economies.

Take into account the current trade ties between India and the EU. In 2024-2025, India’s bilateral trade with the EU was $136.53 billion — $75.85 billion in exports and $60.68 billion in imports. The EU accounts for around 17 per cent of India’s total exports, while India represents about nine per cent of the bloc’s overseas shipments.

India-EU trade deal — a win-win for both

The India-EU Free Trade Agreement will benefit both sides greatly. According to a report by the Global Trade Research Initiative (GTRI), India already enjoys relatively low average tariffs in the EU, around 3.8 per cent, but key labour-intensive sectors such as textiles and clothing still face duties of about 10 per cent. Removing these would directly benefit garments, leather, footwear and other employment-heavy industries that are under pressure globally.

Moneycontrol in a report also noted that high-value, knowledge-intensive sectors like pharmaceuticals and chemicals stand to gain mainly through streamlined regulatory approvals and aligned standards, allowing easier market access for generics, specialty drugs, and chemical products.

The FTA will also give India a chance of further diversification at a time when the US has levied a tariff of 50 per cent — including 25 per cent for purchasing Russian crude.

India also hasn’t had to compromise on sectors such as agriculture and dairy, which has been a red line in the past. The Economic Times reports that the FTA would also restore lost competitiveness post-GSP withdrawal and help Indian exporters cushion the impact of higher US tariffs.

On the other hand, the India-EU FTA gives the European Union access to one of the world’s fastest-growing markets.

Wines, spirits and other alcoholic beverages from the EU are likely to face lower tariffs, making them more affordable to the Indian consumer. Currently, wines and spirits from the EU face import duties of up to 150-200 per cent. This could drastically reduce under the FTA.

Also, European carmakers, especially in the premium segment, are likely to gain easier access to India. European exporters of industrial machinery, electrical equipment, and chemicals could also see a surge in trade as tariff and regulatory barriers are eased.

The FTA will also benefit high-value services and intellectual property sectors, including IT, engineering, business services, and telecom. Even specialised products such as aircraft parts, diamonds, and luxury goods could find new opportunities in India.

Challenges remain

But despite all of this, a few issues still need to be ironed out before the deal is signed and sealed. India wants greater mobility for skilled professionals and safeguards for agriculture, particularly dairy and grains. India has also raised concerns about the EU’s carbon border adjustment mechanism, which could affect exports of steel, aluminium and cement.

Meanwhile, the EU wants steeper cuts in the automobile sector — a worry for India as they believe it would undermine domestic manufacturing and set precedents for Japan and South Korea. India is also pushing back on EU demands for TRIPS-plus protections that could raise medicine costs and weaken India’s generic drug industry.

However, despite the complexities, von der Leyen’s remarks at Davos are a sign of things to come. Expectations are high that the meeting next week —President of the European Council, Antonio Luis Santos da Costa, and President von der Leyen are chief guests at the Republic Day parade — will see India and the EU sealing the game-changer deal.

With inputs from agencies