After nearly two decades of negotiations, India and the European Union (EU) have finally sealed the deal on the ‘biggest ever FTA’. Touted as the “mother of all deals,” this Free Trade Agreement (FTA) is ambitious, commercially significant and the largest such deal ever concluded by either side.

The FTA, which is expected to come into force in 2027, is a long-term move that is likely to strengthen India’s position in global trade and support the ‘Make in India’ initiative. This comes at a time when the EU seeks reliable alternatives for sourcing amid geopolitical tensions and supply-chain disruptions. It is expected to lower costs and expand trade rather than threaten the domestic industry.

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What’s In The India-EU FTA?

India’s Access To European Markets

Under the deal, the EU will eliminate or reduce tariffs on about 97% of its tariff lines, covering 99.5% of trade value. 

  • 90.7% of India’s exports will have immediate duty elimination for important labour-intensive sectors such as textiles, leather and footwear, tea, coffee, spices, sports goods, toys, gems and jewellery and certain marine products, amongst others
  • 2.9% of India’s exports will have zero duty access over 3 and 5 years for certain marine products, processed food items, arms and ammunition, amongst others
  • 6% of India’s exports will have preferential access by way of tariff reduction for certain poultry products, preserved vegetables, bakery products amongst others or through Tariff Rate Quotas (TRQs) for cars, steel, certain shrimps/ prawns products, amongst others.

India’s Offer To The European Union

In turn, India will offer concessions on 92% of its tariff lines, covering 97.5% of EU exports.

  • 49.6% of tariff lines will have immediate duty elimination;
  • 39.5% of tariffs lines are subject to phased elimination over 5, 7, and 10 years’
  • 3% of products are under phased tariff reductions, and a few products are subject to TRQs for Apples, Pears, Peaches, and Kiwi Fruit.

Impact On Automobiles

Under this deal, import duty on fully built imported cars, also known as completely built units, could be cut to 40% in the initial phase and to 10% in the future. It is currently at 110%.

This seems to be a major change, but most mass-market European carmakers do not rely heavily on completely built imports in India. Companies like Volkswagen, Skoda and Renault assemble their vehicles locally using completely knocked-down kits, and these kits already attract a much lower duty of around 17%.

Brands such as Porsche, Lamborghini, and premium models from Audi and BMW import several vehicles as completely built units. The benefit from the reduction is likely limited to such luxury imports. These cars could become more affordable, but their volumes remain small in the overall market.

Under the new duty structure, a €15,000 European car could now land in India at approximately ₹23.2 lakh, competing with various Indian automakers like Mahindra & Mahindra Ltd. However, many Indian automakers have businesses in diversified segments like tractors and commercial vehicles.

Impact On Alcohol

European wines are poised to become noticeably more affordable due to a substantial reduction in tariffs on alcoholic beverages from 150% currently to 75% immediately. Over the next five to ten years, this will be further reduced to 20% for premium wines and 30% for mid-range wines.

In order to protect India’s domestic wine market, wine priced below € 2.5 will not receive any concessions. Tariffs on spirits will fall from 150% to 40%.

France has ranked among India’s top sources of imported wine consistently. French wines hold a strong appeal in India due to their long-standing global reputation for quality, craftsmanship and heritage. French labels such as Chateau Batailley, Chateau Haut-Brion, and various Bordeaux and Burgundy producers are often seen on curated hotel and restaurant wine lists.

With well-established European labels entering at lower price points, Indian players risk losing market share, however the impact may be gradual. State-level duties, logistics costs and distributor margins will continue to play a role in determining final retail prices.