Mumbai: Prime Minister Narendra Modi confirmed the agreement on Tuesday following the India–EU Summit, where leaders underscored the pact’s economic and strategic significance amid global trade uncertainty.
One of the most immediate consumer-facing impacts of the India–EU FTA is expected to be on imported European cars.
Under the agreement, India is likely to reduce import duties to around 40 per cent for a limited number of European vehicles, primarily premium and luxury models with an import value exceeding USD 17,700 (approximately ₹16.3 lakh).
These cars currently attract the highest import duties. Over time, tariffs could be gradually lowered further, potentially approaching 10 per cent in line with global norms, though officials stress that such reductions will be phased in and not implemented immediately.
The initial duty cut itself is significant, as it directly lowers the tax component of vehicle prices, making high-end imported cars noticeably cheaper for Indian buyers. However, mass-market models and electric vehicles are expected to see limited impact in the near term.
The agreement was formalised in the presence of the leadership of the European Union, including the European Commission and the European Council, who were in India after attending the Republic Day celebrations as Chief Guests.
The convergence of diplomacy, ceremony and commerce has positioned New Delhi at the centre of a deal expected to reshape trade flows between two major democratic economies.
India and the EU have been strategic partners since 2004, sharing commitments to democratic values, multilateralism and a rules-based international order. Their ties date back even further to 1962, when India became one of the first countries to establish diplomatic relations with the European Economic Community, the EU’s predecessor.
The timing of the FTA is notable. With the global economy facing renewed turbulence, from aggressive tariff postures by the United States under President Donald Trump, to fragile supply chains and the ongoing Russia–Ukraine war, the India–EU deal sends a strong signal in favour of open, predictable and diversified trade.
Economically, the relationship is already substantial.
The EU is India’s largest trading partner in goods, with bilateral trade reaching about USD 136 billion in 2024–25, alongside a steadily expanding services trade.
European firms have increased investments in India’s manufacturing, clean energy and digital sectors, while Indian companies, from IT services to pharmaceuticals, have strengthened their presence across Europe.
Formal negotiations on the FTA, along with agreements on investment protection and geographical indications, were resumed in 2021. After sustained ministerial engagements through 2025 and early 2026, remaining differences were bridged, paving the way for the final pact.
For India, the agreement promises enhanced access to a 450-million-strong European consumer market. For Europe, it offers a deeper economic foothold in one of the world’s fastest-growing major economies, reinforcing long-term trade and strategic cooperation.