India, EU sign landmark free trade agreement; cars, wine, pharma to get cheaper

India and the European Union on Tuesday signed a long-pending Free Trade Agreement (FTA), which Prime Minister Narendra Modi called a “historic moment” and a new blueprint of shared prosperity between two major democratic powers.

Speaking at a joint press conference after the signing, PM Modi said the agreement came a day after European Union leaders participated in Republic Day celebrations for the first time.

“Today is another historic occasion, when the world’s two largest democratic powers are adding a decisive chapter to their relationship,” he said.

Prime Minister Modi, European Commission President Ursula von der Leyen and European Council President António Luís Santos da Costa witnessed the exchange of documents on an administrative arrangement on cooperation and disaster risk management alongside the trade pact.

The agreement is expected to significantly strengthen economic and political ties between India and the EU at a time of rising geopolitical tensions and global economic challenges.

India, the world’s fourth-largest economy and most populous country, has so far seen relatively low EU imports compared to other markets, largely due to high tariffs and regulatory barriers.

Modi said India and the EU had made “remarkable progress” in their relationship over the past few years.

“Based on shared democratic values, economic synergy and strong people-to-people ties, our partnership is reaching new heights. Today, trade between us stands at 180 billion euros,” the prime minister said.

He said the agreement came at a time of major churn in the global order and would help strengthen stability in the international system.

“Today there is major turmoil in the global order. In such a situation, the partnership between India and the European Union will strengthen stability in the international system,” he said, in a veiled reference to Washington's tariff regime that has upended world order.

Modi said the two sides also held detailed discussions on a range of global issues, including Ukraine, West Asia and the Indo-Pacific.

“Respect for multilateralism and international norms is our shared priority. We also agree that to address today’s challenges, global institutions need reform,” Modi said.

The prime minister said India and the EU were launching an “ambitious and holistic strategic agenda” for the next five years. “In this complex global environment, this agenda will provide clear direction, advance our shared prosperity, accelerate innovation, strengthen defence cooperation and deepen people-to-people ties,” he said.

Calling the partnership one “for global good”, Modi said India and the EU would advance trilateral projects from the Indo-Pacific to the Caribbean. He also said both sides would work together to establish the India-Middle East-Europe Economic Corridor (IMEC) as an important link for global trade and sustainable development.

Ursula von der Leyen thanked India for the “exceptional hospitality” extended to EU leaders during the Republic Day celebrations.

“It was such an honour for us to be your chief guests at the Republic Day yesterday. This is a memory I will carry for a lifetime because the sense of communion was so powerful,” she said.

“India has risen, and Europe is truly glad about it because when India succeeds, the world is more stable, more prosperous and more secure, and we all benefit,” she added.

The European Commission said the deal would help EU companies and farmers export more to India.

Under the agreement, tariffs on over 90% of EU goods exports will be eliminated or reduced, saving up to €4 billion annually in duties on European products.

The EU will gain what it described as the biggest trade opening India has offered to any partner, including privileged access for EU service providers in sectors such as financial services and maritime services.

The agreement also removes or reduces tariffs on EU exports of agri-food products.