India and EU agree to conclude free trade deal by the end of this year

India and the European Union have agreed to finalise a long-pending free trade agreement this year and boost cooperation in trade, technology, connectivity and defence, Indian Prime Minister Narendra Modi and the European Commission chief said.

After meeting European Commission President Ursula von der Leyen in New Delhi, the Indian leader said that the two sides have directed their teams to conclude the bilateral free trade deal by end of this year.

Mr Modi said many decisions were taken to “elevate and accelerate India-EU partnership” in the meeting.

“India-EU strategic partnership is natural. Its core is trust and shared belief in democratic values,” Mr Modi said.

The European Commission chief said the “free trade agreement between the EU and India would be the largest deal of this kind anywhere in the world”.

Brussels is ramping up efforts to seal with deal with New Delhi in the face of potential American tariffs. US President Donald Trump has said he is planning to hit goods made in the EU with tariffs of 25%.

“It is time to be pragmatic and ambitious. And to realign our priorities for today’s realities,” Ms von der Leyen said in a speech to a think tank in New Delhi before meeting with Mr Modi.

“You can count on my full commitment to make sure we can deliver.”

The European Commission chief is in India on a two-day visit from Thursday and is accompanied by top leaders of EU member nations.

India and the EU relaunched talks on the bilateral agreement in 2021, but issues like market access for products such as cars and alcoholic beverages have been sticking points.

The next round of negotiations is set to take place in March.

India and the EU cooperate closely on issues including foreign policy, security and technology. The EU is India’s largest trading partner, ahead of the US and China.

In the 2023-24 fiscal year, exports and imports to the European bloc accounted for more than 130 billion dollars (£102 billion), marking an increase of about 90% over the past decade. More than 6,000 European companies are also present in India.

Ms von der Leyen said the EU and India have the potential to be one of the defining partnerships of this century.

“I want this visit to be the start of this new era. Prime Minister Modi and I share the same view. It is time to take our EU-India Strategic Partnership to the next level,” she said.

For New Delhi, the trade talks have renewed significance after Mr Trump’s decision to impose reciprocal tariffs on imported goods from countries including India.

Last year, India signed a trade agreement with Iceland, Liechtenstein, Norway and Switzerland, who comprise the European Free Trade Association, that includes a commitment of 100 billion dollars (£79 billion) in investments.

The investments are expected to be made across industries including pharmaceuticals, machinery and manufacturing.