The European Union is closing in on a long-awaited free trade agreement with India, European Commission President Ursula von der Leyen signalled at the World Economic Forum in Davos on Tuesday, hinting at what could become one of the most consequential trade breakthroughs for both economies in years.
“There is still work to do. But we are on the cusp of a historic trade agreement. Some call it the mother of all deals. One that would create a market of 2 billion people, accounting for almost a quarter of global GDP,” she said in a section of her speech focused on the EU’s drive to diversify and de-risk its trade partnerships.
WHY THIS DEAL MATTERS
The scale of the proposed pact is enormous. By linking one of the world’s fastest-growing major economies with a bloc that remains a central pillar of global trade, the deal would reshape supply-chain flows at a time when governments are rethinking their economic dependencies.
For the EU, India has become critical to its strategy of reducing reliance on China and expanding ties with trusted partners. For India, deeper access to the 27-nation bloc—its second-largest trading partner—would strengthen export competitiveness and support its ambition to move up the manufacturing value chain.
LONG ROAD WITH RENEWED MOMENTUM
Although the India–EU free trade agreement has been in progress since 2007, talks stalled for nearly a decade before being revived in 2022 with renewed political will. Since then, negotiations have moved in tandem with the India–EU Trade and Technology Council, a platform created to coordinate cooperation across critical technologies, digital governance and supply-chain resilience.
This parallel track has helped narrow gaps on sensitive regulatory issues and modernised the conversation beyond tariffs.
WHAT IS DRIVING THE FINAL PUSH
The urgency on both sides is driven by shifting geopolitical realities. Brussels is accelerating its diversification away from single-country dependencies, while India is positioning itself as a central node in restructured global supply chains.
Bilateral trade has already reached historic highs—goods trade touched €124 billion in 2023, while services trade, led by digital and IT services, is estimated at €60 billion. Negotiators believe a formal agreement would unlock much larger potential, especially in emerging sectors like clean energy, pharmaceuticals, advanced manufacturing and digital services.
THE REMAINING STICKING POINTS
Despite the optimism in Davos, significant hurdles remain. European negotiators continue to push for deeper tariff cuts on automobiles, wines and spirits—areas India has historically shielded to protect domestic producers.
India, meanwhile, is seeking more favourable conditions for the movement of skilled professionals, a sensitive issue inside the EU because visa and mobility rules vary across member states.
Questions around sustainability standards, public procurement access and regulatory harmonisation also remain open. These are politically charged areas, which is why von der Leyen underlined that “there is still work to do.”
Von der Leyen’s upcoming visit to India early next week is expected to be a pivotal moment. Diplomats see the trip as an opportunity to resolve the most contentious issues at the political level, giving negotiators the direction needed to finalise the text. It also comes ahead of a planned India–EU leaders’ meeting later this month, where both sides hope to demonstrate substantial progress—if not announce a breakthrough outright.
WHAT A FINAL DEAL COULD MEAN
A successful agreement would represent one of the EU’s most significant trade achievements in recent years and could dramatically strengthen India’s integration into global supply chains.
It would deepen flows of goods, services and investment, provide more predictable market access, expand cooperation on technology and standards, and signal a strategic alignment at a moment when the global trade landscape is being reshaped.
A combined market representing nearly a quarter of global GDP would instantly establish the pact as one of the most influential trade frameworks in the world.