India’s ‘Mother of All Deals’: The Winners, the Losers and the $33 Trillion Bet

Feb 8, 2026 - 14:00

After nearly two decades of failed negotiations and a year of punishing tariffs, India has pulled off something no one expected: simultaneous trade deals with the world’s two largest consumer markets. The implications for global supply chains, European exporters and 1.4 billion Indian consumers are enormous.

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What just happened? India concluded a sweeping free trade agreement with the EU on 27 January 2026 — dubbed the “mother of all deals” — and followed it exactly one week later with a bilateral trade framework with the United States that slashes US tariffs on Indian goods from 50% to 18%. Together, the two agreements give India preferential access to markets worth over $33 trillion in combined GDP, covering two billion people. It is the most significant shift in Indian trade policy since the country’s founding in 1947.

The Deals That Almost Never Happened

To understand the significance of what India achieved in late January and early February 2026, you need to understand how improbable it was. India and the EU first tried to negotiate a trade deal in 2007. Talks collapsed in 2013 over patent protections, data security and the right of Indian professionals to work in Europe. For the best part of a decade, the world’s largest democracy and its most powerful trading bloc simply stopped talking about free trade.

Meanwhile, India-US trade relations were deteriorating rapidly. Donald Trump’s decision to impose 50% tariffs on Indian exports — a 25% base reciprocal levy plus a further 25% penalty for India’s continued purchase of Russian oil — made India one of the worst-affected economies in Trump’s global trade war. The May 2025 India-Pakistan crisis, and Trump’s disputed claim to have mediated it, further poisoned relations between Washington and New Delhi.

What changed was geopolitical necessity. India found itself squeezed between a volatile America and an adversarial China, while desperately needing to turbocharge its manufacturing exports to create millions of jobs. The EU, meanwhile, was looking to reduce its trade dependence on China and needed a reliable partner to anchor its diversification strategy. As Sumedha Dasgupta of the Economist Intelligence Unit put it, the agreement reflects India’s continued move away from the protectionist policies it has maintained since independence.

What the EU Deal Actually Contains

The EU-India Free Trade Agreement is genuinely historic in scope. It creates a free trade zone of two billion people, encompassing roughly 25% of global GDP and a third of global trade. The EU already trades over €180 billion worth of goods and services with India annually, supporting close to 800,000 European jobs. The deal is expected to double EU exports to India by 2032.

The numbers are striking. The EU will eliminate tariffs on 99.5% of Indian exports, with most duties dropping to zero immediately upon implementation. India, in return, will grant tariff concessions on 97.5% of traded value, though many sensitive sectors are protected through phased reductions over five to ten years.

For India, the biggest gains are in labour-intensive sectors. Textiles, leather, footwear, marine products, gems and jewellery — collectively worth $33 billion in exports — will face zero EU duties where they previously faced levies of 4% to 26%. India’s Commerce Minister Piyush Goyal has said the deal could create six to seven million jobs in the textile sector alone. For European exporters, the prize is access to India’s 1.5 billion consumers. European wines, spirits, olive oil, confectionery, machinery, automobiles, pharmaceuticals, and aircraft all gain preferential access to a market that has been virtually closed to them for decades. India will reduce its notoriously high import duties on European cars from up to 110% down to 10%, though under strict quota limits. The deal is expected to reduce India’s tariffs on European products by around €4 billion per year.

Sensitive sectors on both sides remain protected. The EU keeps its tariffs on beef, chicken, rice, sugar and milk powders. India safeguards its dairy, cereals, poultry and certain fruit and vegetable sectors. A bilateral safeguard mechanism allows either side to act if imports cause difficulties.

The deal also goes well beyond tariffs. It covers digital trade, intellectual property protection, services liberalisation, and a comprehensive mobility framework that will ease the movement of Indian professionals and their families into the EU across 37 services sub-sectors including IT, business services and traditional medicine. For European companies, it provides privileged access to India’s financial services and maritime transport markets.

What the US Deal Contains — and What It Doesn’t

The US-India agreement, announced on 2 February, is a very different animal. Where the EU deal is comprehensive and detailed, the US deal is a framework — heavy on headlines, light on specifics, and already the subject of significant confusion over what was actually agreed.

The core headline is clear enough: US tariffs on Indian goods drop from 50% to 18%. That gives India a marginally better rate than Pakistan (19%), Vietnam (20%) and Bangladesh (20%), making Indian exports competitively attractive to US buyers for the first time in over a year.

Beyond that, the picture gets murkier. According to Trump, India has agreed to eliminate tariffs on US goods “to zero,” to stop buying Russian oil, and to purchase $500 billion worth of American energy, technology, agricultural products and coal over five years. Modi’s response, notably, confirmed only the 18% tariff reduction and expressed gratitude — without explicitly confirming any of the other commitments.

As Carnegie Endowment’s Evan Feigenbaum pointed out, India currently imports less than $50 billion in goods from the US annually, making a $500 billion commitment over five years — a 900% increase — highly unlikely. Indian Commerce Minister Goyal has indicated New Delhi could ramp up purchases in energy, nuclear power, data centres and aviation, including up to $80 billion in Boeing aircraft orders, but reaching $500 billion remains, as one analyst put it, “a stretch.”

On Russian oil, India’s position is similarly ambiguous. Indian state-run refiners signed their first long-term US LPG import deal late last year, and private refiners have reportedly reduced Russian purchases. But a complete halt to Russian oil imports would be economically painful and politically difficult for Modi, particularly with three major state elections due this year.

Who Are the Big Winners?

Indian manufacturers and exporters are the clearest beneficiaries. The combination of zero-duty EU access and 18% US tariffs gives India’s labour-intensive sectors — textiles, leather, footwear, gems, toys, furniture — access to the world’s two largest consumer markets on terms they have never previously enjoyed. Former chief economic adviser Arvind Subramanian, now at the Peterson Institute, said the deals will leave India with tariff rates on manufactured goods “that could never have been dreamt of just two or three years ago.”

European agri-food exporters gain a market that has been effectively closed. Wine, spirits, olive oil, cheese and confectionery producers now have a route into 1.5 billion consumers, with tariff reductions worth €4 billion annually. The European automotive industry, particularly German manufacturers, gains access under quota to a market where European cars have been priced out by duties exceeding 100%.

India’s pharmaceutical sector benefits on both sides. BMI, Fitch Solutions’ research unit, highlighted the elimination of 11% tariffs on EU drug imports — including cancer therapies, biologics and GLP-1 weight-loss medications — worth $1.2 billion in 2024. Indian pharma firms simultaneously gain diversified export access to the EU, which BMI expects to drive the market from $31.2 billion to $45.7 billion by 2035.

Indian IT services benefit indirectly from both deals. Bernstein analysts noted that while the US deal primarily covers manufactured goods, improved bilateral relations reduce scrutiny on IT services and lower the risk of punitive taxes. The EU deal’s mobility framework, meanwhile, eases movement for Indian tech professionals across 37 services sub-sectors.

Boeing stands to gain enormously from India’s aviation needs, with potential orders of up to $100 billion including engines and spare parts.

Who Loses?

Indian automakers took an immediate hit. Shares of Maruti Suzuki, Hyundai Motor India, Tata Motors and Mahindra & Mahindra all fell sharply on news of the EU deal, as markets priced in increased competition from European manufacturers.

Indian dairy and agricultural lobbies face long-term pressure, even though both deals contain short-term protections. The US is pushing hard for India to cut agricultural tariffs to zero, and the EU deal opens the door to European agri-food products that will compete with domestic producers.

ASEAN manufacturing competitors — particularly Vietnam and Bangladesh — lose relative advantage. India’s 18% US tariff rate is now lower than their 20%, potentially diverting investment and orders that had been flowing to Southeast Asia.

Russia is a geopolitical loser. Whether or not India fully halts Russian oil imports, the direction of travel is clear: New Delhi is reorienting its energy purchasing towards the US and diversifying away from Moscow, weakening one of Russia’s most important remaining economic lifelines.

What It Means for Consumers

For Indian consumers, the deals promise lower prices on imported goods — from European wines and cars to American technology and agricultural products. The EU deal alone is expected to reduce import costs by €4 billion annually, with savings that should filter through to retail prices over time.

For European and American consumers, the impact is more indirect but still significant. Cheaper Indian textiles, leather goods and pharmaceuticals entering Western markets will increase competition and potentially moderate price inflation in those categories. Generic drug prices in particular could benefit from India’s expanded export access.

The Bigger Picture

These deals represent nothing less than a fundamental reorientation of the Indian economy. A country that has zealously guarded its domestic markets since 1947, maintaining some of the highest tariffs in the developed and developing world, has now locked in preferential access to markets worth over $33 trillion in combined GDP.

For the EU, the India deal is a strategic counterweight to its dependence on China and a signal that rules-based trade cooperation can still deliver results in an era of tariff wars and bilateral arm-twisting. As von der Leyen said at the announcement, it sends “a signal to the world that rules-based cooperation still delivers great outcomes.”

For the US, the deal is more transactional and more fragile. As Carnegie’s Feigenbaum warned, Trump has a pattern of announcing deals that subsequently fall apart — ask South Korea, ask Canada. The 18% tariff rate is a boon for India, but it rests on a foundation of personal diplomacy between Trump and Modi rather than the institutional depth of the EU agreement.

The real test will come in implementation. The EU deal requires ratification by the European Parliament, the Council of the EU and India’s Union Council of Ministers. The US framework still needs a formal agreement, expected in mid-March. And both deals will face domestic opposition — from Indian farmers worried about foreign competition, from European manufacturers concerned about a flood of cheap Indian goods, and from American trade hawks who believe 18% is still too generous.

But the direction of travel is unmistakable. India has announced to the world that it is open for business in a way it has never been before. For European businesses and investors, the opportunity is generational.