The 'Mother of all deals' signed: A new dawn for the India-EU partnership

This agreement signifies the commitment of the two largest democracies as champions of open trade amid a rising tide of global protectionism

In a historic moment that redefines the global economic landscape, India and the European Union have signed the long-awaited Free Trade Agreement (FTA), ending a negotiating journey that spanned almost two decades. Dubbed the ‘Mother of All Deals’ due to the sheer economic weight of the signatories, this agreement unites the fastest-growing developing country — India — and the world’s largest trading bloc. This agreement also signifies the commitment of the two largest democracies as champions of open trade amid a rising tide of global protectionism.

 

The journey to this signature has been a marathon, not a sprint. Launched in 2007 and suspended in 2013 due to mismatched ambitions, negotiations were revived in 2022 with renewed political will. Today’s signing marks the triumph of strategic pragmatism over hesitation, signalling a massive ‘win-win’ for both economies.

 

The strategic imperative: Why now?

 

The timing of this agreement is no coincidence. In a world grappling with geopolitical fragmentation, ongoing wars, and the volatility of ‘transactional’ trade policies from major powers such as the US, the EU and India have chosen stability by further deepening their economic partnership. This trade deal is not just about tariffs; it is a geopolitical stabiliser. It allows both regions to diversify and ‘de-risk’ their supply chains, moving away from over-dependence on single geographies such as China.

 

A win-win for the two economic giants

 

For the European Union, the deal unlocks the world’s fastest-growing major economy. European manufacturers gain access to a dynamic market of 1.4 billion people for their high-quality machinery, automobiles and wines, while its green technology firms find a massive partner for decarbonisation projects.

 

For India, the agreement is a game-changer for ‘Make in India’. It secures duty-free access to the EU’s high-value large market for labour-intensive sectors such as textiles, leather, and gems and jewellery — sectors that are crucial for job creation. In the textiles and apparel sector alone, the EU’s total global imports stood at $263.5 billion in 2024, highlighting the economic importance and long-term potential of the EU market for Indian exporters.

 

In other words, this FTA would restore India’s preferential tariffs in the EU market, which it enjoyed for decades through a unilateral trade arrangement — the Generalised System of Preference (GSP). However, besides tariff reduction, this FTA provides a comprehensive framework to address non-tariff barriers through strengthened regulatory cooperation, standards harmonisation, customs facilitation, transparency and predictable trade rules.

 

Furthermore, the concurrent signing of an Investment Protection Agreement (IPA) is set to catalyse massive inflows of European capital and technology, providing the predictability global investors have long sought.

 

Supply chain resilience: The new gold standard

 

At the heart of this pact is resilience. By integrating the automotive, pharmaceutical and digital value chains of both regions, the FTA creates a shield against global supply shocks. The inclusion of auto components — a sector where India is rapidly becoming a global hub — into the European supply chain exemplifies this synergy. The agreement ensures that the ‘needle’ of European technology and capital can finally thread the ‘strong thread’ of Indian manufacturing scale [User Analogy].

 

Furthermore, the focus on MSMEs in the agreement through a dedicated chapter is aimed at addressing the structural disadvantages that often prevent smaller firms from benefiting from trade deals and their integration into global value chains. The agreement makes provision for setting up SME contact points by both trading partners and a shared digital platform. This would help small industry access clear, up-to-date information on tariffs, customs procedures and market-entry requirements.

 

Breaking barriers: Mode 4 and the mobility of talent

 

Perhaps one of the most significant victories for India is the breakthrough on ‘Mode 4’, the movement of natural persons. Moving beyond the traditional hurdles of immigration debates, the deal recognises that modern trade requires the fluid movement of talent. Mirroring success in the UK-India pact, the FTA streamlines visa procedures and facilitates the mobility of Indian professionals, IT experts and service suppliers. This ensures that India’s demographic dividend can effectively service European businesses, addressing skill shortages in the EU while boosting India’s services exports.

 

Global impact: A beacon of open trade

 

The economic impact of this union is staggering. By integrating a combined market of over $24 trillion, the India-EU FTA stands as the largest free trade agreement in the world by economic weight. In an era where the World Trade Organization system faces paralysis and nations are turning inward, the India-EU FTA stands as a testament to the power of rules-based cooperation. It sends a powerful message to the Global South and the industrialised North alike: that even in turbulent times, democracies can come together to deliver prosperity, resilience and a shared future.

 

The ‘Mother of All Deals’ has finally arrived, and the world is watching.

 

The author is chairman of Hi-Tech Gears Limited and former chairman of NABCB, a constituent of the Quality Council of India  Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper