India and the European Union have finalised their landmark free trade agreement after concluding 18 years of negotiations that began in 2007, with Prime Minister Narendra Modi calling it the "mother of all deals." According to latest reports, the agreement is expected to be signed later this year and may come into force from early next year, marking an acceleration from earlier projections of 2027 implementation. The pact creates a market of about 2 billion people and will eliminate EU tariffs on 90% of Indian goods, slashing duties to zero on nearly ₹2.8 lakh crore of exports. "India's FTA with the EU, which accounts for 25% of global GDP and 33% of global trade, is a major breakthrough," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited. As per a commerce ministry official, this is one of the largest bilateral trade deals that has happened across the world. At present, bilateral trade in goods stands at about ₹11.4 lakh crore and is expected to cross ₹16.8 lakh crore within three to four years of the pact's implementation, while trade in services, currently estimated at around ₹6.7–7.1 lakh crore, could reach ₹10.5 lakh crore over the same period.
Automaker stocks declined sharply as the agreement provides quota-based duty concessions for European vehicles, with India's duties on vehicles imported from EU to fall from 110% to 10% over five years under a 250,000-vehicle annual quota. According to Reuters, this development is likely to benefit Volkswagen, BMW, Mercedes-Benz and Renault. The deal specifies that EU cars priced below 15,000 euros (₹13.3 lakh) are excluded from the agreement, while cars above that threshold are split into three segments each with quotas and separate tariffs. Tariffs on most cars will be cut to 30–35% at launch of the deal, then phased down to 10% over five years. For electric vehicles (EVs), tariff cuts begin from the fifth year of the agreement, with no duty cuts outside quotas and no tariff reduction on Completely Knocked Down (CKD) kits. As reported by market sources, M&M shares ended over 4% weaker, Hyundai Motor closed 3.6% lower, while Maruti Suzuki and Tata Motors also lost over 1%. This development is significant as India is the world's third-largest car market, but foreign car makers currently have a share of less than 4% due to high taxes.
European wines are set to enter the Indian market at lower prices under the bilateral agreement as India provides significant import duty concessions. The agreement slashes wine duties from 150% to 20% for expensive wines, which would be lowered gradually over seven years. However, wines priced below 2.5 euros will receive no duty concessions. Tariffs on spirits will be lowered to 40%, while beer duties are set at 50%. According to latest reports, India will be giving duty concessions to EU wines in line with what it has agreed for Australia and New Zealand, but with slightly lower thresholds. The EU will eliminate duties for Indian wine, providing market access that can cater to the demands of the growing Indian diaspora. Current trade data shows India imports wines worth ₹66 crore from the EU, along with blended whiskies, brandy, gin, tequila, vodka and liqueurs amounting to ₹737 crore. Market reaction was immediate with Sula Vineyards ending 3.4% lower while Radico Khaitan and United Spirits lost 1-2% each on concerns over increased competition.
The deal's impact was immediate with textile stocks leading market gains as the EU agreed to cut tariffs to zero on key Indian exports. According to The Economic Times, Kitex Garments ended 12% higher, Go Fashion up 9%, KPR Mills jumping 7%, and Indo Count Industries gaining 6%. Shrimp exporters rallied significantly with Apex Frozen Foods closing 10% higher and Avanti Feeds up 3%. The EU will scrap all tariffs on 90% of Indian goods at launch, extending to 93% within seven years, with tariffs cut to zero on marine products (currently up to 26%), chemicals (12.8%), leather/footwear (17%), textiles (12%), and apparel (4%). Major Indian sectors gaining duty-free access include textiles, apparel, clothing, marine products, chemicals, plastics, rubber, leather and footwear, base metals, gems and jewellery, furniture, toys, and sports goods. The EU's average tariff rate falls from 3.8% to 0.1% for India, with duties removed on ₹2.8 lakh crore worth of exports on the first day of implementation.
The agreement eliminates tariffs on EU exports including fruit juices and processed foods, while reducing or removing duties on olive oil, margarine, and other vegetable oils. According to Reuters, EU firms will save up to ₹33,600 crore annually in duties as tariffs will be eliminated or reduced on over 90% of EU exports. Indian tariffs on 30% of goods traded with EU will fall to zero immediately, with the deal covering 99.5% of bilateral trade receiving some form of tariff concession. India completely scraps tariffs on most industrial imports from EU, including machinery and electrical equipment (currently at 44%), chemicals (up to 22%) and pharmaceuticals (11%). Tariffs on 90% of European optical, medical, and surgical equipment will be eliminated, while duties on nearly all EU aircraft and spacecraft exports to India will also be removed. Indian farmers will gain enhanced export opportunities for grapes, tea, coffee, spices, gherkins, ghee, cucumbers, sweetcorn, and dried onions. However, India will not give any duty concessions in the dairy (including cheese), soya meal and cereals sectors, while the EU is also protecting its sugar, beef, meat and poultry sectors. On the services front, the EU has opened 144 sub-sectors out of 155 to India, while India is opening 102 sub-sectors to them, including financial and maritime services.
Beyond the economic benefits, India and the EU have signed the "India-EU Security and Defence Partnership" agreement, with EU Foreign Policy Chief Kaja Kallas and India's External Affairs Minister S. Jaishankar formalising the pact. European Commission President Ursula von der Leyen announced that the EU is opening its first legal gateway office in India to assist Indian students and professionals seeking to study, work, or live in Europe. According to Reuters, India is seeking improved access to tariff-free EU steel import quotas as an FTA partner, with the outcome due by June 30, ahead of EU rules taking effect on July 1. While there is no India specific exemption from the EU's carbon duties, India says it can negotiate if EU grants flexibility to any other nation. A technical group will help Indian firms verify carbon footprints, alongside a separate agreement to ensure EU technical and financial support to help emission cuts in India. The EU has proposed ₹42,000 crore support over the next two years to help India cut greenhouse gas emissions. The agreement includes binding rules on labour rights, environment, women's empowerment and climate cooperation, with disputes handled by independent panels with binding rulings. Draft texts are to be published, followed by legal review, translation and approval by EU governments, the European Parliament and India, expected within a year.
