India and the European Union Sign a 'Historic' Free Trade Agreement

SadaNews - India and the European Union have signed a free trade agreement described as "historic", which Indian Prime Minister Narendra Modi referred to as the "mother of agreements" during a speech he delivered on Tuesday at the "Indian Energy Week" conference, and European stocks rose following the deal.

Modi stated that the free trade agreement signed with the European Union, which represents about 25% of the global GDP and approximately a third of global trade, will also complement India's trade agreements with the UK and the European Free Trade Association.

He added that the agreement will establish a market that includes nearly two billion people, at a time when global trade relations are facing severe tests due to rising geopolitical tensions.

Modi said: "I congratulate our colleagues linked to all sectors, such as textiles, gemstones and jewelry, leather and footwear. This deal will provide significant support to these sectors."

Modi and European Commission President Ursula von der Leyen are expected to issue a joint statement later today during the India-EU summit in New Delhi, revealing the details of the agreement that has taken nearly two decades to negotiate.

For New Delhi, which bears the repercussions of punitive tariffs imposed by the United States, this agreement could provide a strong boost to the economy. Since former US President Donald Trump imposed a 50% tariff on the Asian economy in August of last year, India has been searching for alternative markets for its exports and has signed trade agreements with several countries.

This is the fourth major trade agreement for India since the United States, India's largest export market and major trade partner, imposed high tariffs in August. India had previously signed trade agreements with the UK, Oman, and New Zealand.

According to data from the European Commission, the value of goods exchanged between India and the EU in 2024 exceeded 120 billion euros, equivalent to about 140 billion dollars, making the EU India's largest trading partner. Key exports from New Delhi to the EU include machinery and equipment, chemicals, base metals, metal products, and textiles.

India is the EU's ninth-largest trading partner, accounting for 2.4% of the total goods trade in the bloc during 2024, lagging significantly behind major partners such as the United States (17.3%), China (14.6%), and the UK (10.1%). Major European exports to India include machinery and equipment, transport equipment, and chemicals.

European Commission President Ursula von der Leyen stated during the World Economic Forum in Davos on January 20 that the EU is committed to "choosing fair trade instead of tariffs, partnership instead of isolation, and sustainability instead of exploitation."

India's exports to six of the EU's largest markets, namely the Netherlands, Germany, Italy, Spain, France, and Belgium, amounted to about 43.8 billion dollars during the nine months ending in December, compared to 65.88 billion dollars for its exports to the United States alone.

Experts believe that, despite the significance of the agreement between India and the EU, it will not replace the need for a trade agreement between India and the United States.

In 2024, the surplus of Indian goods trade with the United States was about 45.8 billion dollars, compared to a much smaller surplus with the EU of 25.8 billion dollars.