India and EU Seal Landmark Free Trade Agreement, Slashing Billions in Tariffs

India and the European Union have concluded a long-awaited Free Trade Agreement (FTA), marking one of the most significant trade pacts ever signed by either side.

The deal, finalised during a high-level India-EU Summit, is expected to eliminate or reduce up to €4 billion in tariffs on EU exports and substantially boost bilateral trade flows.

The agreement will reduce or phase out tariffs on 96.6% of EU exports to India, covering key sectors such as automobiles, alcohol, machinery, chemicals, pharmaceuticals, steel and iron products. At the same time, sensitive agricultural sectors on both sides including dairy, sugar, meat, rice and ethanol have been excluded to protect domestic interests.

European Commission President Ursula von der Leyen, speaking alongside Indian Prime Minister Narendra Modi, described the pact as the “mother of all trade deals”, highlighting its scale and strategic importance. She called the agreement a partnership between two major global economic powers the world’s second-largest and fourth-largest economies.

Prime Minister Modi hailed the deal as the beginning of a “new era” in India-EU relations, stating that it would improve access to European markets for Indian farmers, MSMEs and exporters, while also attracting greater investment into India.

Major Tariff Reductions Across Key Sectors

Under the agreement:

• EU car tariffs in India will be gradually reduced from 110% to 10%, with an annual quota of 250,000 vehicles.
• Tariffs of up to 44% on machinery, 22% on chemicals, 11% on pharmaceuticals, and 22% on steel and iron will be largely eliminated over time.
• Wine tariffs will fall sharply from 150% to 75%, and eventually to around 20%, while olive oil tariffs will drop from 45% to zero within five years.
• Levies on processed food products such as bread and confectionery currently as high as 50% will be removed.

In return, over 99% of Indian exports, valued at approximately $75 billion, will gain preferential access to the EU market. Key Indian sectors expected to benefit include textiles, gems and jewellery, pharmaceuticals, engineering goods and chemicals. Notably, EU duties on Indian textiles previously exceeding 10% will be reduced to zero.

Boost to Trade, Investment and Strategic Alignment

The European Union is currently India’s largest trading partner, with bilateral trade in goods and services exceeding €180 billion annually. Officials expect the new agreement to potentially double EU exports to India over time, while strengthening supply chains and regulatory cooperation.

The deal also includes commitments to streamline customs procedures, improve regulatory coordination, and enhance cooperation on standards steps expected to reduce trade friction and costs for businesses on both sides.

In a significant climate-related move, the EU has pledged €500 million to support India’s industrial decarbonisation efforts, addressing concerns over the bloc’s upcoming carbon border tax on products such as steel and chemicals.

While European industry groups broadly welcomed the agreement, some sectors expressed caution. The EU steel industry has raised concerns over trade imbalances, while politically sensitive sectors - such as India’s dairy industry and several EU agricultural segments were deliberately excluded from the pact.

The agreement will now undergo approval by the European Parliament, EU member states, and India’s Cabinet before entering into force. Once implemented, it will become one of the most comprehensive trade agreements India has signed, aligning with New Delhi’s broader push to expand trade ties covering over half of India’s global trade.

read more: https://ec.europa.eu/commission/presscorner/detail/en/ip_26_184

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