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India and the European Union appear to be on the brink of sealing one of the most ambitious trade agreements in recent global economic history, as European Commission President Ursula von der Leyen signalled at the World Economic Forum in Davos that negotiations are approaching their decisive moment. After nearly two decades of intermittent discussions, the long-pending India–EU Free Trade Agreement is now being described by leaders on both sides as the “mother of all deals,” reflecting not only its scale but also its potential to reshape trade, investment and strategic cooperation between two of the world’s largest economic blocs.

India–EU FTA: A High-Stakes Agreement Years in the Making

The proposed India–EU Free Trade Agreement has been under discussion since 2007, making it one of the longest-running trade negotiations involving India. Talks were suspended for several years due to differences over market access, tariffs, regulatory standards and sustainability commitments, before being formally resumed in July 2022 amid a changing global economic and geopolitical environment. Since then, negotiators on both sides have accelerated efforts to bridge longstanding gaps, driven by a shared recognition that closer economic ties are increasingly important in a world marked by supply chain disruptions, strategic competition and shifting trade alliances.

Speaking in Davos, Ursula von der Leyen described the agreement as historic in scope and ambition, noting that it could create a combined market of nearly two billion people and account for close to a quarter of global gross domestic product. While she acknowledged that some work remains, her remarks suggested that the broad contours of the deal are largely in place. The scale of the proposed agreement reflects the growing economic weight of India and the European Union, as well as their shared interest in building resilient trade partnerships beyond traditional transatlantic and Asia-Pacific frameworks.

The political momentum behind the talks has also strengthened in recent months. Von der Leyen, along with European Council President António Costa, is set to visit India as the chief guest at the country’s 77th Republic Day celebrations on January 26, followed by the India–EU Summit on January 27. The timing of the visit has fuelled speculation that a major announcement or political breakthrough on the trade agreement could be imminent. India’s Commerce and Industry Minister Piyush Goyal has echoed similar optimism, repeatedly referring to the proposed pact as the “mother of all deals,” underlining the priority New Delhi attaches to the negotiations.

At its core, the agreement aims to significantly deepen economic integration between India and the 27-nation European Union by covering trade in goods, services and investment, alongside provisions on regulatory cooperation and sustainable development. For India, the FTA is expected to unlock greater access to one of the world’s most affluent consumer markets, particularly for labour-intensive and high-value sectors such as textiles, footwear, pharmaceuticals, engineering goods and gems and jewellery. Reduced tariffs and clearer regulatory pathways could enhance the competitiveness of Indian exports and support the country’s broader manufacturing and export-led growth ambitions.

For the European Union, the agreement holds the promise of improved access to one of the world’s fastest-growing major economies. European exporters have long sought lower tariffs on automobiles, wines, spirits and other high-value products, as well as greater certainty for investments in India’s expanding consumer, infrastructure and services markets. The EU also sees the FTA as a strategic tool to diversify supply chains, reduce dependence on a limited set of markets and reinforce economic ties with a key democratic partner in the Indo-Pacific region.

Despite the progress made since 2022, the negotiations have not been without challenges. Several sensitive chapters remain under discussion, including tariff reduction schedules, market access for services, data protection, sustainability standards and regulatory alignment. India has traditionally been cautious about opening up sectors that could affect domestic industries and employment, while the EU has pushed for stronger commitments on environmental and labour standards. Bridging these differences has required careful balancing, political flexibility and sustained engagement at the highest levels.

Trade, Strategy and the Broader Significance of the ‘Mother of All Deals’

Beyond its immediate economic implications, the India–EU Free Trade Agreement carries significant strategic weight. In recent years, both sides have sought to strengthen their partnership in response to shifting global power dynamics, trade fragmentation and rising geopolitical uncertainty. The agreement is increasingly viewed not just as a commercial pact, but as a pillar of a broader strategic relationship encompassing technology, climate action, supply chain resilience and global governance.

The European Union is already one of India’s largest trading partners, with bilateral trade in goods reaching around USD 90 billion in 2024–25. India’s exports to the EU include pharmaceuticals, engineering goods, textiles and chemicals, while imports from Europe are dominated by machinery, transport equipment and high-value manufactured products. The FTA aims to reduce or eliminate tariffs across a wide range of goods, streamline customs procedures and create a more predictable environment for businesses on both sides. For services, the agreement could open new opportunities in areas such as information technology, professional services and financial services, where Indian firms have been seeking greater access to European markets.

Investment is another crucial dimension of the proposed pact. European companies are among the largest foreign investors in India, and a comprehensive agreement could further boost investment flows by providing stronger legal protections, clearer dispute resolution mechanisms and enhanced regulatory cooperation. For India, attracting high-quality foreign investment is a key priority as it seeks to expand manufacturing capacity, upgrade infrastructure and accelerate the transition to a digital and green economy. For European firms, India represents a vast and increasingly sophisticated market with long-term growth potential.

Sustainability and climate considerations have emerged as particularly important elements of the negotiations. The European Union has placed strong emphasis on environmental standards, labour rights and sustainable development in its recent trade agreements, reflecting both policy priorities and domestic political pressures. India, while supportive of sustainable growth, has emphasised the need for flexibility and recognition of different development stages. How these issues are ultimately resolved in the FTA could set important precedents for future trade agreements involving emerging economies.

The broader geopolitical context has also added urgency to the talks. Global trade has become more fragmented in recent years, with rising protectionism, trade disputes and the weaponisation of economic tools prompting countries to seek reliable and like-minded partners. For the EU, deepening ties with India aligns with its strategy of strengthening partnerships in the Indo-Pacific and reducing overdependence on a narrow set of markets. For India, the agreement fits into its broader efforts to diversify trade relationships, enhance export competitiveness and position itself as a key player in global supply chains.

Von der Leyen’s remarks in Davos reflected this convergence of economic and strategic interests. By describing the agreement as the “mother of all deals,” she highlighted not only its size but also its symbolic importance at a time when faith in multilateral trade is under strain. The creation of a market spanning two billion people would send a strong signal in favour of open, rules-based trade and cooperation between major democratic economies.

As negotiations enter what appears to be their final phase, expectations are high on both sides. Businesses, investors and policymakers are closely watching developments, aware that the final shape of the agreement will have far-reaching implications for trade patterns, investment decisions and economic policy. While the complexity of the negotiations means that last-minute hurdles cannot be ruled out, the political momentum generated by high-level engagement and public statements suggests a shared determination to bring the process to a successful conclusion.

The coming weeks are therefore likely to be critical. With top European leaders set to visit India and co-chair the India–EU Summit, the stage is set for potential breakthroughs that could redefine one of the world’s most important economic relationships. Whether the agreement is formally concluded in the immediate term or requires further fine-tuning, the trajectory is clear: India and the European Union are closer than ever to forging a comprehensive trade pact that could reshape their economic ties for decades to come.

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