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New Delhi: India is on the verge of finalizing a significant defence and trade agreement with the European Union, following discussions between Defence Minister Rajnath Singh and a high-ranking EU delegation in New Delhi on Tuesday.

This meeting, held at Singh's office, is part of broader efforts to enhance strategic, economic, and security relations between India and the EU.

The discussions align with the visit of European Commission President Ursula von der Leyen, who arrived in India on January 24.

She is set to engage in talks with Prime Minister Narendra Modi during the 16th India–EU Summit later on Tuesday, alongside European Council President Antonio Costa.

This summit is anticipated to be a pivotal moment in bilateral relations, with officials expected to announce the completion of negotiations on the much-anticipated India–EU Free Trade Agreement (FTA), often referred to as the 'mother of all trade deals.'

Commerce Secretary Rajesh Agrawal confirmed on Monday that the negotiations for the FTA have been successfully concluded, with a formal announcement planned for the summit. He characterized the agreement as balanced and forward-looking, emphasizing its potential to significantly enhance trade and investment flows while fostering economic integration between the two entities.

The bilateral goods trade between India and the EU is projected to reach $136 billion in 2024–25, establishing the EU as India's largest trading partner.

The bloc constitutes nearly 17% of India's total exports, while exports to India account for about 9% of the EU's total shipments.

Although the negotiations have been finalized, the agreement is expected to come into effect next year.

Agrawal noted that the text of the agreement will undergo legal review over the next five to six months, followed by formal signing, ratification by the European Parliament, and approval from the Indian Cabinet.

Officials indicated that the summit will also emphasize enhancing cooperation in critical areas such as defence and security, clean energy transition, digital technologies, and people-to-people connections. The ongoing defence discussions with Rajnath Singh are viewed as part of a larger initiative to fortify the India–EU strategic partnership.

The India-EU FTA is seen as a significant advancement in expanding India's global trade presence. This agreement could mitigate the effects of high US tariffs by creating broader opportunities in the European market, particularly for Indian exports like textiles and jewellery.

One of the most notable outcomes of the agreement is the opening of India's automobile sector to European car manufacturers. Import duties on European vehicles are expected to be drastically reduced from the current 110% to approximately 40%, making cars from brands such as Volkswagen, Mercedes-Benz, and BMW more accessible in the Indian market.