India-EU ‘Mother of All Deals’ FTA Signed Today
27th Jan. 2026
India and the European Union have finalized a historic free trade agreement (FTA), known as the “mother of all deals” by India’s Prime Minister Narendra Modi. The pact was announced at the India Energy Week on Tuesday. The pact is signed as it is expected to significantly boost trade and investment between the two economies.
The agreement will bring together markets of approximately two billion people at a time, when global trade faces increasing geopolitical pressures. Modi highlighted that the deal will particularly benefit sectors such as textiles, gems and jewellery, leather, and footwear. “I congratulate our colleagues associated with every sector, such as textiles, gems and Jewelry, leather and shoes. This deal will prove to be very supportive to these sectors”, PM Modi in deal announcement speech.
The FTA complements India’s recent trade agreements with the UK and the European Free Trade Association. Moreover, it strengthens the country’s position amid rising international trade tensions. Both Modi and European Commission President Ursula von der Leyen are expected to release a joint statement later on Tuesday at the India-EU summit in New Delhi. The statement will include all the details of the final terms of the agreement.
Why the India-EU ‘Mother of All Deals’ Took Years to Finalize?
The India-EU negotiations, which were relaunched in 2022, had taken nearly two decades to conclude due to the sensitive issues, including agriculture and the automotive sector. Experts noted that both India and the EU have traditionally been protective of their domestic industries, which delayed the deal’s finalization.
“Indian and European union can both be very protectionist,” said Hosuk Lee Makiyama, director of the European Centre for International Political Economy. “Neither the EU nor India has secured a large trade deal that could impact their economic growth, especially as the U.S. and China are closed off for a deal, so this deal will be one of the best they can get.”
The pact comes at a crucial moment for India, which has faced punitive U.S. tariffs, including a 50% levy imposed last August. Seeking alternative markets, India has also signed trade agreements with New Zealand, Oman, and the UK. Consequently, this positions the EU deal as a strategic lifeline for its export sectors.
Economic Implications for India and the EU after FTA
India and the EU already maintain robust trading relations. In 2024, bilateral trade in goods reached over €120 billion (around $140 billion) that made the EU India’s largest trading partner. India primarily exports machinery, appliances, chemicals, base metals, mineral products, and textiles to the bloc, while the EU supplies machinery, transport equipment, and chemicals to India.
Despite this growth, India remains the ninth largest trading partner for the EU, which accounts for just 2.4% of the bloc’s total trade. It is far behind major partners such as the U.S. and China. Analysts note that while the FTA marks a significant milestone, it will not replace the strategic importance of an India-U.S. trade deal. That partnership accounted for a $45.8 billion goods trade surplus for India in 2024. The surplus with the EU was lower at $25.8 billion.
Von der Leyen emphasized the EU’s approach to trade at the World Economic Forum earlier this month, stating, “Choosing fair trade over tariffs. Partnership over isolation. Sustainability over exploitation.” For India, the FTA is seen as a potential catalyst to diversify export markets, strengthen industrial growth, and secure economic resilience in a volatile global landscape.
Web Resources on the India-EU FTA Deal
1. Reuters.com: India, EU finalise landmark trade deal
2. BBC.com: India and EU announce landmark trade deal
3. NBCNews.com: India and E.U. finalize landmark trade deal as they hedge against U.S.
4. AcademicBlock.com: Role of Trade and Tariffs in Economic Policy