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What is the story about?
India and the European Union (EU) have announced the successful conclusion of talks for a Free Trade Agreement (FTA). The formal deal signing will be undertaken after legal scrubbing, which is likely to take 6 months, and the trade pact is expected to come into force in 2027.
India's Commerce Ministry has said that tariffs on $33.5 billion out of $35 billion (over 95%) of India's exports to the EU (as per FY 24 figures) will drop to zero once the FTA comes into force. Terming it as one of the biggest bilateral deals across the world with a combined market size of nearly 2 billion consumers, the Commerce Ministry said that tariffs on 30% of EU's exports to India by value will reduce to zero immediately, and the tariffs will gradually come down on 93% of EU's exports to India over a period of 10 years, while there will be an import quota on 3% of items.
In return, tariffs on 90% of India's exports will drop to zero, with 3% more reduction expected in phases, and 6% of exports to be covered under a quota.
India's dairy and agriculture sector won't be covered under the FTA, which will have tariff liberalization on 99% of tariff lines by the EU, and on 97% of tariff lines by India. Out of a total of 155 sub-sectors in services, India will open up 104 sub-sectors while the EU will open 144 sub-sectors.
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While the EU is expected to gain in exports of gain in wine, automobiles and technology products, the drop in average tariffs for India's exports to the EU from 3.8% to 0.1% will increase competitiveness of India's exports.
Bilateral merchandise trade between India and the EU was valued at ₹11.5 Lakh Crores ($136.54 billion) in FY 2024-25, with India exporting roughly ₹6.4 Lakh Crore ($75.85 billion) to the EU. India-EU trade in services reached ₹7.2 Lakh Crore ($83.10 billion) in 2024.
About 70.4% of tariff lines, covering 90.7% of India’s exports, will see immediate duty elimination for labour-intensive sectors such as textiles, leather and footwear, tea, coffee, spices, sports goods, toys, gems and jewellery, and certain marine products.
Another 20.3% of tariff lines, covering 2.9% of India’s exports, will get zero-duty access over three and five years for certain marine products, processed food items, and arms and ammunition.
Around 6.1% of tariff lines, accounting for 6% of India’s exports, will receive preferential access through tariff reductions for certain poultry products, preserved vegetables and bakery products, or through TRQs for cars, steel, and certain shrimps and prawns.
Labour-intensive sectors (such as textiles, apparel, marine, leather, footwear, chemicals, plastics/rubber, sports goods, toys, gems, and jewellery), comprise of more than ₹2.87 Lakh crore ($33 billion) of exports that are currently subjected to import duty between 4% to 26% in the EU.
Overall, India is offering 92.1% of its tariff lines, covering 97.5% of EU exports, under the agreement.
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Of these, 49.6% of tariff lines will see immediate duty elimination, while 39.5% of tariff lines will be subject to phased elimination over 5, 7 and 10 years.
A further 3% of products will come under phased tariff reductions, with a few products subject to TRQs for apples, pears, peaches and kiwi fruit.
What gets cheaper?
India's Commerce Ministry has said that tariffs on $33.5 billion out of $35 billion (over 95%) of India's exports to the EU (as per FY 24 figures) will drop to zero once the FTA comes into force. Terming it as one of the biggest bilateral deals across the world with a combined market size of nearly 2 billion consumers, the Commerce Ministry said that tariffs on 30% of EU's exports to India by value will reduce to zero immediately, and the tariffs will gradually come down on 93% of EU's exports to India over a period of 10 years, while there will be an import quota on 3% of items.
In return, tariffs on 90% of India's exports will drop to zero, with 3% more reduction expected in phases, and 6% of exports to be covered under a quota.
India's dairy and agriculture sector won't be covered under the FTA, which will have tariff liberalization on 99% of tariff lines by the EU, and on 97% of tariff lines by India. Out of a total of 155 sub-sectors in services, India will open up 104 sub-sectors while the EU will open 144 sub-sectors.
Also Read: Vedanta board approves sale of 1.59% stake in Hindustan Zinc via OFS
While the EU is expected to gain in exports of gain in wine, automobiles and technology products, the drop in average tariffs for India's exports to the EU from 3.8% to 0.1% will increase competitiveness of India's exports.
Bilateral merchandise trade between India and the EU was valued at ₹11.5 Lakh Crores ($136.54 billion) in FY 2024-25, with India exporting roughly ₹6.4 Lakh Crore ($75.85 billion) to the EU. India-EU trade in services reached ₹7.2 Lakh Crore ($83.10 billion) in 2024.
About 70.4% of tariff lines, covering 90.7% of India’s exports, will see immediate duty elimination for labour-intensive sectors such as textiles, leather and footwear, tea, coffee, spices, sports goods, toys, gems and jewellery, and certain marine products.
Another 20.3% of tariff lines, covering 2.9% of India’s exports, will get zero-duty access over three and five years for certain marine products, processed food items, and arms and ammunition.
Around 6.1% of tariff lines, accounting for 6% of India’s exports, will receive preferential access through tariff reductions for certain poultry products, preserved vegetables and bakery products, or through TRQs for cars, steel, and certain shrimps and prawns.
Labour-intensive sectors (such as textiles, apparel, marine, leather, footwear, chemicals, plastics/rubber, sports goods, toys, gems, and jewellery), comprise of more than ₹2.87 Lakh crore ($33 billion) of exports that are currently subjected to import duty between 4% to 26% in the EU.
Overall, India is offering 92.1% of its tariff lines, covering 97.5% of EU exports, under the agreement.
Also Read: ICICI Prudential AMC turns constructive on equities, sees opportunity after market correction
Of these, 49.6% of tariff lines will see immediate duty elimination, while 39.5% of tariff lines will be subject to phased elimination over 5, 7 and 10 years.
A further 3% of products will come under phased tariff reductions, with a few products subject to TRQs for apples, pears, peaches and kiwi fruit.
What gets cheaper?
| Product | Tariff Earlier | Post Deal |
| Cars | 110% | 10% (2.5 lakh limit) |
| Medical equipment | 27.5% | 0% |
| Electrical equipment | 44% | 0% |
| Aircraft & spacecraft | 11% | 0% |
| Spirits | 150% | 40% |
| Beer | 110% | 50% |
| Olive oil | 45% | 0% |
| Kiwis & pears | 33% | 10% |
| Fruit juices | 55% | 0% |
| Non-alcoholic beer | 55% | 0% |
| Processed food | 50% | 0% |
| Pasta | 50% | 0% |
| Chocolate | 50% | 0% |
| Mutton | 33% | 0% |
| Sausages, prepared meat | 110% | 50% |
| Sector | Tariff Earlier | Post Deal |
| Marine | 26% | 0% |
| Chemicals | 12.8% | 0% |
| Footwear | 17% | 0% |
| Apparel | 12% | 0% |
| Textile | 12% | 0% |
| Consumer goods | 10.5% | 0% |
| Base metals | 10% | 0% |
| Rail products, ships | 7% | 0% |
| Toys, sports goods | 4.7% | 0% |
| Gems & jewellery | 4% | 0% |
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