'Mother of all deals': At Davos 2026, EU signals FTA with India will cover quarter of global GDP

Momentum is building around one of the most ambitious trade negotiations underway today. Speaking at the World Economic Forum in Davos, Ursula von der Leyen, the president of the European Commission, signalled that the European Union and India are edging closer to sealing a long-pending free trade agreement that could reshape economic ties between two of the world’s largest markets.

“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,” von der Leyen said, linking the negotiations to the EU’s broader push to diversify and de-risk its trade relationships.

Why the deal carries weight

The potential scale of the agreement is significant. A comprehensive pact between the EU and India would link a fast-growing emerging economy with a bloc that remains a cornerstone of global trade, at a time when supply chains are being redrawn and economic dependencies reassessed.

For Brussels, India has emerged as a key partner in reducing reliance on China and strengthening ties with countries viewed as strategically aligned. For New Delhi, deeper access to the EU’s 27-member market, its second-largest trading partner, would bolster exports and support its ambition to climb the global manufacturing value chain.

A long negotiation regains pace

Talks on an India–EU free trade agreement date back to 2007 but were stalled for nearly a decade before being revived in 2022 amid renewed political engagement. Since then, negotiations have progressed alongside the India–EU Trade and Technology Council, which focuses on cooperation in critical technologies, digital governance and supply-chain resilience.

This parallel engagement has helped narrow regulatory gaps and broaden the dialogue beyond tariff reductions alone.

What is driving the final push

Geopolitics is adding urgency on both sides. The EU is accelerating efforts to diversify away from single-country dependencies, while India is positioning itself as a central player in restructured global supply chains.

Trade volumes already reflect the depth of the relationship. Goods trade reached €124 billion in 2023, while services trade, led by digital and IT services, is estimated at €60 billion. Negotiators argue that a formal agreement could unlock far greater potential, particularly in clean energy, pharmaceuticals, advanced manufacturing and digital services.

The unresolved hurdles

Despite the optimism voiced in Davos, key sticking points remain. European negotiators continue to seek steeper tariff cuts on automobiles, wines and spirits, sectors India has traditionally protected to shield domestic producers.

India, meanwhile, is pressing for improved mobility for skilled professionals, a sensitive issue within the EU given differing visa and labour regimes across member states. Sustainability standards, access to public procurement, and regulatory alignment are also unresolved, underscoring von der Leyen’s caution that “there is still work to do.”

Her planned visit to India early next week is widely seen as a critical juncture, with diplomats expecting political-level engagement to help bridge the most contentious gaps. The trip comes ahead of an India–EU leaders’ meeting later this month, where both sides are keen to demonstrate tangible progress.

What a deal would change

If concluded, the agreement would rank among the EU’s most consequential trade deals in recent years and significantly deepen India’s integration into global supply chains.

Beyond boosting trade and investment flows, it would offer greater predictability for businesses, expand cooperation on technology and standards, and signal a strategic alignment at a moment when the global trade order is being reshaped. A combined market accounting for nearly a quarter of global GDP would instantly place the pact among the world’s most influential trade frameworks.