Why India–EU Free Trade Agreement Is a Strategic Breakthrough in India’s Global Trade Engagement? Tax on cars, spirits and wine imported from EU may be slashed
Prime Minister Narendra Modi and European Commission President Ms. Ursula von der Leyen, on Tuesday jointly announced the conclusion of the India–European Union Free Trade Agreement (India–EU FTA) at the 16th India–EU Summit, held during the visit of the European leaders to India. This announcement marks a historic milestone in India–EU economic relations and trade engagement with key global partners.
This agreement is likely to be implemented in 2027. Following this deal, the tax on European cars such as BMW and Mercedes in India will be reduced from 110% to 10%.
In addition, taxes on spirits and wine imported from Europe to India may also be lowered. Currently, European alcoholic beverages are subject to a 150% tariff. This will be reduced to 20-30%.
The European Union is India’s one of the largest trading partner, with bilateral trade in goods and services growing steadily over the years. In 2024–25, India’s bilateral trade in goods with the EU stood at INR 11.5 Lakh Crore (USD 136.54 billion) with exports worth INR 6.4 Lakh Crore (USD 75.85 billion) and imports amounting to INR 5.1 Lakh Crore (USD 60.68 billion). India-EU trade in services reached INR 7.2 Lakh Crore (USD 83.10 billion) in 2024.
HIGHLIGHTS OF TRADE DEAL
India, 4th largest economy, and the European Union, 2nd largest economy, comprising 25% of Global GDP, Forge a Trusted Partnership
Unprecedented Market Access: Over 99% of Indian exports gain preferential entry into the EU, unlocking massive growth potential
The FTA will open new opportunities for MSMEs and create jobs for women, artisans, youth and professionals
INR 6.41 Lakh Crore (USD 75 Billion) exports poised for take-off, including 33 bn USD of exports in labour-intensive sectors like textiles, leather, marine products, gems and jewellery set to gain immensely from preferential access under the FTA
Carefully calibrated auto liberalisation with reciprocal market access to propel Make in India
Favourable Market Access Opens Doors for India’s Agricultural and Processed Food Exports
India Safeguards sensitive Agricultural products and Dairy Sector: no market access.
Ambitious and Commercially Meaningful Market Access in Services
Future-Ready Mobility Framework Expands Global Opportunities for Skilled and Semi-Skilled Indian Professionals
The India–EU FTA marks a new chapter in bilateral economic engagement, strengthening trade, and strategic cooperation between India and the 27-member EU bloc.
EU becomes India’s 22nd FTA partner. The Government since 2014 has signed trade deals with Mauritius, UAE, UK, EFTA, Oman and Australia, and announced trade deal with New Zealand. In 2025, India signed trade deal with Oman and UK and announced conclusion of trade deal with NZ.
The India-EU trade deal, along with India’s FTA with the UK and the EFTA effectively opens up the entire European market for Indian businesses, exporters and entrepreneurs.
Beyond boosting commerce, it reinforces shared values, fosters innovation, and creates opportunities across sectors and stakeholders from MSMEs, women and skilled professionals to farmers and exporters. Aligned with India’s vision of “Viksit Bharat 2047,” the FTA positions India as a dynamic, trusted, and forward-looking partner on the global stage, setting the foundation for inclusive, resilient, and future-ready growth for both regions.