India–EU close to ‘historic’ free trade agreement covering quarter of global GDP

Davos: India and the European Union are on the verge of finalising a “historic” Free Trade Agreement (FTA) that would create a combined market of nearly two billion people and account for around a quarter of global GDP, European Commission President Ursula von der Leyen said on Tuesday at the World Economic Forum in Davos.

Describing the proposed pact as the “mother of all deals”, von der Leyen said negotiations have reached their final stage, with only limited issues remaining. The much-anticipated agreement is expected to be formally announced during the India–EU summit scheduled for January 27.

Her remarks come at a time of heightened global trade uncertainty, triggered by aggressive tariff policies pursued by former US President Donald Trump against several countries. Against this backdrop, India and the EU are positioning the FTA as a strategic response to protectionism and a move to strengthen resilient supply chains.

“I am travelling to India. There is still work to be done, but we are at the edge of a historic trade agreement. Some call it the mother of all deals. It would create a market of two billion people and represent roughly a quarter of global GDP,” von der Leyen said.

European Council President António Costa and Ursula von der Leyen are scheduled to attend India’s Republic Day celebrations as chief guests from January 25 to 27, underscoring the growing strategic and political closeness between New Delhi and Brussels.

According to EU officials, the FTA aims to significantly boost trade in goods and services, reduce tariffs, and improve market access in sectors such as manufacturing, automobiles, pharmaceuticals, digital services, green technology and renewable energy. The agreement is also expected to strengthen cooperation on supply chain resilience, sustainability standards and investment protection.

Von der Leyen emphasised that Europe wants to deepen economic ties with emerging growth centres of the 21st century. “Europe wants to trade with today’s growth centres, from Latin America to the Indo-Pacific and beyond, which will shape the economic power of this century,” she said.

However, the negotiations have not been without challenges. EU officials have previously indicated that India’s close ties with Russia, particularly in energy and defence sectors, could complicate certain aspects of the agreement. Despite this, both sides appear determined to move forward, recognising the strategic importance of the partnership amid shifting global power dynamics.

If concluded, the India–EU FTA would be one of the largest trade agreements in the world, potentially reshaping global trade flows and reinforcing India’s role as a key economic partner for Europe in the Indo-Pacific region.

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