Anna Hartz
Trade deals shape economies and politics. They can open markets, create jobs, and change how countries relate to each other.
After signing an agreement with South America’s Mercosur bloc, the European Union is now set to finalize a long-awaited free trade deal with India. The announcement is expected on Tuesday at a summit in New Delhi, reports Hotnews.
India’s Car Market
Under the deal, India plans to cut customs duties on cars imported from the EU from 110% to 40%. This would be the biggest opening of the country’s car market so far. Sources told Reuters that the reduction will apply immediately to some EU passenger cars costing more than 15,000 euros. Over time, duties could drop further to 10%, giving European automakers better access to India. Conditions could still change at the last minute.
Officials call the agreement the “mother of all agreements.” It could increase trade and help India export goods such as textiles and jewelry. These products have been hit by high tariffs from the US since last August. India is the world’s third-largest auto market, but domestic manufacturers have long been protected by steep tariffs.
Currently, India charges 70% to 110% on imported cars. Under the new deal, around 200,000 internal combustion engine cars per year could benefit from immediate duty cuts. Battery electric vehicles will be excluded for the first five years to protect domestic companies like Tata Motors and Mahindra. After that, they would receive similar reductions.
Reduces Dependence on China
Once the deal is signed and ratified by the European Parliament, it could take at least a year to take full effect. The agreement would be India’s ninth in four years, showing the government’s push for market access. For the EU, it supports supply chain diversification and reduces dependence on China while tapping into India’s $4.2 trillion economy.
The pact benefits both sides. EU goods face high tariffs in India, especially on cars, chemicals, and machinery. Lowering these taxes could create opportunities for European exporters. India would gain better access for textiles, clothing, and IT services. Agriculture and dairy are excluded, while automobiles, wine, and spirits face gradual or limited reductions.
Both sides will need to navigate non-tariff barriers, carbon taxes, and regulatory hurdles. Analysts say compromises on these issues will determine whether the agreement delivers balanced benefits for India and the EU.
Sources: Hotnews, Reuters
