India and the European Union have sealed a long-pending landmark trade agreement, Prime Minister Narendra Modi said on Tuesday, as both sides aim to buffer themselves against uncertain ties with the United States.
After almost two decades of intermittent negotiations, the pact is set to open India’s large and closely protected market to free trade with the 27-member EU, its largest trading partner.
EU chief Ursula von der Leyen said Tuesday that the new India-Europe trade agreement has created a vast market “of two billion people”, as reported by AFP.
“Europe and India are making history today,” von der Leyen said in a statement in New Delhi, where she is meeting Prime Minister Narendra Modi. “We have concluded the mother of all deals. We have created a free trade zone of two billion people, with both sides set to benefit.”
What needs to happen for the deal to start working?
According to the official release by the European Commission, here are the steps the EU still needs to take:
1. Publish negotiated draft texts.
2. Legal revision and translation into all official EU languages.
3. Propose the agreement to the Council for signature and conclusion.
4. Adoption by the Council.
5. Signing of the agreement between the EU and India.
6. European Parliament’s agreement to the deal.
7. The Council’s decision on concluding the deal (essentially allowing it to enter into force).
8. Once India also ratifies the Agreement, it can enter into force.
How will the deal avoid the products of non-Indian origin being imported into the EU through India just to benefit from the tariffs?
The EU and India have agreed on rules of origin that ensure that only products that have been significantly processed in one of the parties can benefit from the tariff preferences of the agreement. This will help avoid, the situation where other countries simply export to India and re-export to the EU, benefiting from the tariffs.
India-EU trade
India and the EU were also expected to finalize agreements to ease mobility for seasonal workers, students, researchers and highly skilled professionals, along with a security and defense partnership, AFP reported.
“India and Europe have made a clear choice. The choice of strategic partnership, dialogue and openness,” von der Leyen wrote on social media. “We are showing a fractured world that another way is possible.”
Why India-EU trade deal matter?
India is on track to become the fourth-largest economy this year, according to International Monetary Fund projections.
New Delhi, which has relied on Moscow for key military hardware for decades, has tried to cut its dependence on Russia in recent years by diversifying imports and pushing its own domestic manufacturing base, AFP reported.
For India, the tariff cuts with the EU will lead to more exports in labour-intensive sectors that will help partially offset the impact of US tariffs, said Ajay Srivastava, a former Indian trade official, as reported by Reuters.
He said the deal will also give an immediate price advantage for EU products in India because of some relief from its high tariffs, for instance, up to 110% on cars.
An India–US trade agreement fell apart last year following a breakdown in communication between the two governments.
Meanwhile, India–EU negotiations were revived in 2022 after a nine-year hiatus and gained fresh momentum after Trump imposed tariffs on multiple trading partners, including a 50% duty on Indian goods.
(With inputs from agencies)
