India and the European Union finally sealed the much-awaited Free Trade Agreement on Tuesday, broadening the horizons of strategic partnership between the two blocs.
Under the pact, New Delhi has agreed to gradually slash tariffs on European cars from a whopping 110% to just 10%, giving greater access to outside players to one of the most protected sectors of the Indian economy.
Indian levies on imported cars ranged from anywhere between 70% and 110%
The drastic opening up of the Indian market to EU car makers like Volkswagen, Mercedes-Benz and BMW gains them easier access to a scantly occupied space. Lesser levies also allow carmakers to sell imported vehicles for a cheaper price.
Thus far, EU held only 4% share of India’s 4.4-million units a year car market. The market was dominated by Japan’s Suzuki Motor as well as homegrown brands Mahindra and Tata that together held two-thirds.
Besides this, tariffs will be fully abolished for car parts after five to ten years. Tariffs ranging up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals will also be mostly eliminated.
Free Trade Agreement between EU and New Delhi has been termed as ‘Mother of All Deals’. The FTA will expand bilateral trade and lifts Indian exports of goods such as textiles and jewellery, which have been hit by 50% US tariffs since late August.
Legal scrubbing of the agreement is now underway, with the government aiming to release the legally cleared text within the next two weeks. Following ratification on both sides, the agreement is expected to enter into force about a year from now.
According to the Commerce Ministry, bilateral trade in goods and services between India and the EU stood at over $219 billion in 2024-25.
India is well-positioned to gain from this deal as it gives preferential market access to over 99% of Indian exports by value into the EU, the ministry said.
The EU will eliminate tariffs on 90% of Indian imports from the first day onwards, with additional tariff lines phased out or covered under quotas. In total, 96.8% of EU tariff lines will be opened for India.
The Commerce Ministry said nearly $33 billion worth of Indian exports will benefit immediately from zero-duty access when the agreement comes into force.
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