India-EU FTA opens EU market to 99% exports, cuts duties on luxury cars, wines

New Delhi, Jan 27: With the India-EU free trade agreement (FTA), the country has secured unprecedented market access for more than 99% of Indian exports by trade value to the EU, bolstering the "Make in India" initiative, the Commerce Ministry said on Tuesday.

With this historic deal, touted as the biggest in India’s history, Rs 6.41 lakh crore ($75 billion) worth of exports are poised for take-off, including $33 billion from labour-intensive sectors such as textiles, leather, marine products, gems and jewellery, which are expected to gain significantly from preferential access under the FTA.

Union Minister for Commerce and Industry Piyush Goyal said the conclusion of the India–EU FTA represents a defining achievement in India’s economic engagement and global outlook.

“This supports India’s approach to secure trusted, mutually beneficial and balanced partnerships. Beyond a conventional trade deal, it represents a comprehensive partnership with strategic dimensions and is one of the most consequential FTAs,” he said.

Imported automobiles to get cheaper

Once the agreement comes into force likely next year, premium luxury European cars such as BMW, Mercedes, Lamborghini, Porsche and Audi are set to become cheaper in the Indian market as India will offer quota-based import duty concessions under the pact, an official said..

Under the pact, the EU will eliminate duties in a phased manner for Indian automobiles, while India will reduce levies to around 10% for a specified number of imported vehicles.

At present, India’s import duty in the automobile segment ranges from 66% to 125 .

The India-EU FTA will strongly drive technological innovation within the Indian automotive sector, Mercedes-Benz India MD and CEO Santosh Iyer said on Tuesday

“Taking note of sensitivity on both sides, we have agreed to a quota-based ecosystem, wherein we are trying to take care of each other’s sensitivities,” the official said.

India continues to strongly protect its domestic auto industry, which is a major employment generator and a core sector under the government’s "Make in India" initiative.

Explaining further, the official said India’s automobile market is largely dominated by small cars priced between Rs 10 lakh and Rs 25 lakh, a segment in which EU exporters have limited interest.

“Cars that are likely to sell below Rs 25 lakh will not be exported from the EU to India. They may manufacture here, but they will not be exporting those cars,” the official said, adding that this price segment is the most important and fastest-growing market for India.

Above Rs 25 lakh, including petrol, diesel and hybrid models, India’s market size is limited, but interest remains high due to EU manufacturers’ strength in the premium segment.

Under the agreement, quota-based market access has been provided, with quotas increasing in a phased manner.

“Having taken care of that, we have given them quota-based market access. Beyond the quota, if the market grows, they should come and build here,” the official said.

Italian supercar maker Lamborghini, which sells vehicles in India starting at around Rs 3.8 crore and imports all its models, is expected to benefit from the FTA.

India has also extended similar quota-based concessions to UK carmakers under earlier trade agreements.

For electric vehicles (EVs), India’s quotas will begin from the fifth year of the agreement to protect the rapidly growing domestic EV ecosystem.

“It will not start from day one because our EV market and production are growing. We have protected them for the first five years,” the official said.

European wine prices set to fall

The FTA will also make European wines cheaper in India. Under the pact, duties on expensive EU wines will fall sharply from 150% to 20%, while no duty concessions will be offered for wines priced below 2.5 euros. Indian wines, too, will get duty-free access in EU member countries.

“Like auto, wine is one of the biggest exportable items for the Indian industry. We have given duty concessions in a calibrated way, and duties will be reduced in seven years,” the official said.

India has followed a similar model to its FTAs with Australia and New Zealand. The country has also secured quota-based duty-free access for table grapes worth around USD 100 million to the EU, which imports about USD 1.4 billion worth of grapes annually.

Officials said lower or zero import duties under the FTA will improve competitiveness across sectors, including automobiles, wines, textiles, pharmaceuticals and services, while ensuring long-term benefits for India’s manufacturing ecosystem.

Along with India’s FTAs with the UK and the European Free Trade Association (EFTA), the latest EU deal effectively opens up the entire European market for Indian businesses, exporters and entrepreneurs.

With inputs from agency