New Delhi – India and the European Union have reached an agreement to finalize a free trade deal by the end of this year, as announced by both sides on Friday following talks between Indian Prime Minister Narendra Modi and European Commission President Ursula Von der Leyen in the Indian capital.
The negotiations between India and the EU have been ongoing for several years, but the recent threat of tariffs by U.S. President Donald Trump has added a sense of urgency to conclude the pact. Many countries are now looking to increase access to markets outside of the U.S. in response to Trump’s policies.
Von der Leyen, along with leaders of EU countries, visited New Delhi for talks with the Indian prime minister. She referred to India as a “like-minded friend” and stated that “we have tasked our teams to build on this momentum” to finalize the free trade agreement.
In addition to the trade deal, both sides also discussed strengthening their defense and security partnership. Modi stated that they have prepared a “blueprint for collaboration” in areas such as trade, technology, investment, and security.
Before her meeting with Modi, Von der Leyen expressed that the EU and India have the potential to be one of the defining partnerships of this century and it is time to take their strategic partnership to the next level.
According to analysts, the current geopolitical climate is pushing countries to diversify their partnerships. For India, which is facing challenges in navigating the turbulence unleashed by Trump, Europe emerges as a valuable partner. While neither can afford to disengage from the U.S., both India and Europe must do more to strengthen their ties in response to Trump’s unpredictable policies, wrote political analyst C. Raja Mohan in The Indian Express newspaper.
A free trade agreement between the EU and India would be the largest deal of its kind in the world, as stated by Von der Leyen. She emphasized the need to be pragmatic and ambitious in realigning priorities to address the current realities.
Trump’s plans for reciprocal tariffs have also raised concerns for Indian exports to the U.S. The EU is currently India’s largest trading partner in goods, with bilateral trade reaching over $130 billion in 2023-24.
Negotiations between India and the EU began several years ago but were stalled for eight years before resuming in 2021. The main points of contention have been India’s reluctance to lower tariffs on key European imports such as cars, whiskey, and wine, while the EU has been hesitant to ease visa restrictions for Indian professionals.
India is also seeking greater access to the EU for cheaper drugs and chemicals. As the world’s fifth-largest economy with a large middle class, India is seen as an attractive market, but high protectionist barriers have hindered trade.
Earlier this week, India and the UK also resumed trade talks during a visit by British business and trade secretary Jonathan Reynolds to New Delhi. India’s commerce minister, Piyush Goyal, stated that both countries aim to double bilateral trade in a decade. Reynolds also emphasized that securing a trade deal was a top priority for the UK government.
Trade analysts believe that there is a sense of urgency to finalize trade pacts. “It seems there is a real intent on the part of India and other partner countries to do something this time. The timing is crucial – President Trump’s threat of tariffs can cause trade disruptions. So, I think countries want to conclude deals before the global mood changes from being relatively open to more protectionist,” said trade analyst Biswajit Dhar in New Delhi.
While India has made slow progress in clinching free trade pacts in the past, it is now stepping up efforts to conclude deals amid fears that potential shifts in global trade could pose a challenge to meeting Prime Minister Modi’s goal of growing exports to $1 trillion by 2030.
“The trade uncertainties unleashed by Trump’s tariffs will push the Indian government to closely examine the levels of protection in the country. It can no longer afford to ignore this issue,” said Dhar. “Every major country is interested in the large Indian market but complains about high tariffs.”
In conclusion, the agreement between India and the EU to finalize a free trade deal by the end of this year is a significant step towards strengthening their strategic partnership. It not only opens up opportunities for increased trade and investment but also showcases the potential for like-minded countries to work together in the face of global challenges. With the threat of tariffs looming, it is crucial for countries to come together
