India-EU conclude FTA talks; zero-duty for apparel, chemicals; concessional access for cars, wines

New Delhi | India and the European Union on Tuesday announced the conclusion of negotiations for the free trade agreement (FTA), under which a number of domestic sectors such as apparel, chemicals and footwear will get duty-free entry into the 27-nation bloc, while the EU will get access to the Indian market at concessional duty for cars and wines, an official said.

The deal, concluded after negotiations spanning over two decades, has been termed as the "mother of all deals" as it will create a market of about 2 billion people.

The official said that, except for auto and steel, almost all the Indian goods (over 93 per cent) from India will get zero-duty access in the European Union (EU), and of the remaining over 6 per cent, Indian exporters will get tariff reduction and quota-based duty concessions (for goods like automobiles).

The EU will eliminate import duty on 90 per cent of Indian goods on the first day of implementation of the free trade agreement (FTA), which is expected to come into force early next year. On three per cent, levies will be eliminated in a phased manner in seven years.

"So 99.5 per cent of the trade value, concessions are being given by the EU to India," the official said.

On the other hand, the EU will get duty-free access for 93 per cent of its goods over a ten-year period in India. India will remove duties on only 30 per cent of European goods on the first day of implementing the pact.

India is also giving duty concessions and quota-based reductions on 3.7 per cent of trade value for the EU. In all, India is giving duty concessions on 97.5 per cent of the trade value for the EU.

The major Indian sectors which will get 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 official said.

At present, these sectors attract duties ranging from 0 to 26 per cent in the EU.

India has also liberalised tariffs for EU goods under the FTA.

"But in our case, India will reduce import duty to zero for the EU in over 10 years. The initial drop-down to zero is limited. On EIF (entry into force), we will reduce to 30 per cent of our trade value. But gradually, we will go down to zero on 93 per cent of our total bilateral trade value,” the official said.

On the services front, the EU has made one of its best offers to India, opening 144 sub-sectors out of 155, and India is opening 102 sub-sectors to them.

In addition to that, there are commitments around students' mobility, the official said, adding "we do have some commitments on post-study work visas also from the EU”.

Outside trade in goods and services, the FTA has chapters on digital trade, sanitary and phytosanitary measures, technical barriers to trade, and intellectual property rights. There is no chapter on energy, critical minerals and government procurement.

The average EU tariffs are already low. They are around 3.8 per cent, and under the trade deal, they will be reduced to 0.1 per cent for India.

But in some sectors, the duties are high. These include marine, chemicals, plastics and rubber. On all these, the EU will eliminate the duties for India under the trade deal.

India's exports from these sectors totalled USD 35 billion in 2024. Duties will be removed on USD 33.5 billion on the first day of the implementation. And on remaining, it will go down to 'zero' in three, five and seven years.

In automobiles, both sides have negotiated on a "quota" based duty concessions because the EU has a "very" aggressive demand in this sector.

India's auto sector is largely dominated by small cars (retail prices Rs 10 lakh-Rs 25 lakh), and the EU's interest in that segment is not great.

"We have decided that cars which are likely to sell below Rs 25 lakhs in this country, the EU will not be exporting those cars to India. They may manufacture it here," the official said.

The Rs 25 lakh vehicles include petrol, diesel, and hybrid. Above Rs 25 lakh, India's market is limited, but the EU's interest is high as they are good manufacturers in this segment.

At present, India's import duty on automobiles ranges from 66 per cent to 125 per cent. India will not give any out-of-quota duty reduction.

For electric vehicles (EVs), India's quotas will start from the fifth year of the agreement.

Duty reductions for EVs will vary across segments.

"In some segments, it will be 35 per cent and in some, it will be 30 per cent in the first year. And then it will go down slowly," the official said.

India will not give any duty concessions in the dairy (including cheese), soya meal and cereals sectors. The EU is also protecting its sugar, beef, meat and poultry sectors.

India has received quota-based duty reduction for table grapes in the EU. The EU imports about USD 1.4 billion worth of table grapes annually.

“We have got duty-free access for around USD 100 million, that is 85,000 tons of grapes,” the official said.

India will reduce duties in seven years. The duty would fall from 150 per cent to 20 per cent on high-value wines over seven years. For wines below 2.5 euros, there will be no concessions.

At present, bilateral trade in goods stands at about USD 136 billion and is expected to cross USD 200 billion within three to four years of the pact's implementation, according to the ministry official. Similarly, trade in services, currently estimated at around USD 80–85 billion, could reach USD 125 billion over the same period.