The EU has eyed India - the world’s most populous nation - as an important market for the future.
“Europe and India are making history today,” von der Leyen said in a statement, a day after she and Costa were feted as guests of honour at India’s Republic Day parade.
“We have created a free trade zone of two billion people, with both sides set to benefit.”
EU officials said the deal was the most ambitious India had ever signed, and European companies would benefit from so-called “first mover advantage”.
Europe’s key agricultural, automotive and service sectors stand to gain.
New Delhi sees the European bloc as an important source of much-needed technology and investment to rapidly upscale its infrastructure and create millions of new jobs.
‘Highest level of access’
Bilateral trade in goods reached €120b in 2024, an increase of nearly 90% over the past decade, according to EU figures, with a further €60b in trade in services.
Under the agreement, India is expected to ease market access for key European products.
Tariffs on cars will be gradually lowered from a top rate of 110% to as low as 10%, while duties on wines progressively go down from 150% to as low as 20%.
Currently at 50%, tariffs on processed foods - including pasta and chocolate - will be eliminated, according to the EU.
Von der Leyen said she expected exports to India to double, and that the EU would “gain the highest level of access ever granted to a trade partner in the traditionally protected Indian market”.
European firms will get privileged access to the Indian financial services and maritime transport market, the bloc said.
For India, it would boost sectors including textiles, gems and jewellery, and leather goods, as well as the service sector, Modi said.
Talks went down to the wire focusing on a few sticking points, including the impact of the EU’s carbon border tax on steel, according to sources familiar with the discussions.
‘Clear choice’
The accord comes as both Brussels and New Delhi have sought to open up new markets in the face of US tariffs and Chinese export controls.
India and the EU were also expected to conclude an accord to facilitate movement for seasonal workers, students, researchers and highly skilled professionals, and a security and defence pact.
“India and Europe have made a clear choice. The choice of strategic partnership, dialogue and openness,” von der Leyen wrote on social media. “We are showing a fractured world that another way is possible.”
India is on track to become the fourth-largest economy this year, according to International Monetary Fund projections.
New Delhi, which has relied on Moscow for key military hardware for decades, has tried to cut its dependence on Russia in recent years by diversifying imports and pushing its own domestic manufacturing base.
Europe is doing the same with regard to the United States.
-Agence France-Presse
