After nearly two decades of on-off negotiations, the deal will pave the way for India to open up its vast and guarded market to free trade with the 27-nation EU, its biggest trading partner.
"Yesterday, a big agreement was signed between the European Union and India," Modi said.
"People around the world are calling this the mother of all deals. This agreement will bring major opportunities for the 1.4 billion people of India and the millions of people in Europe."
Modi and European Commission President Ursula von der Leyen are expected to make a joint announcement at an India-EU summit in New Delhi, along with the details of the deal, later on Tuesday.
Trade between India and the EU stood at $US136.5 billion ($A197.4 billion) in the fiscal year through March 2025.
The formal signing of the India-EU deal would take place after legal vetting expected to last five to six months, an Indian government official aware of the matter has said.
"We expect the deal to be implemented within a year," the official added.
The agreement comes days after the EU signed a pivotal pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland.
During the same period, New Delhi finalised pacts with Britain, New Zealand and Oman.
The spate of deals underscores global efforts to hedge against trade with the United States as President Donald Trump's bid to take over Greenland and tariff threats on European nations test longstanding alliances among Western nations.
An India-US trade deal collapsed last year after a breakdown in communications between their two governments.
Talks between India and the EU were relaunched in 2022 after a nine-year lull, and gathered momentum after Trump put tariffs on several trading partners, including a 50 per cent tariff on goods from India.
For India, the tariff cuts with the EU will lead to more exports in labour intensive sectors that will help partly offset the impact of US tariffs, said Ajay Srivastava, a former Indian trade official.
He said the deal will also give an immediate price advantage for EU products in India because of some relief from its high tariffs, for instance up to 110 per cent on cars.
