India and the European Union have agreed to a major free trade deal after more than a decade of negotiations. The pact covers goods worth over €120 billion a year and will cut tariffs on almost all products traded between the two sides. Officials from both reached the agreement in recent talks, marking a big step in their economic links.
Background
Talks between India and the EU started back in 2007 but faced many stops and starts. Both sides wanted better access to each other's markets, but differences over farm goods, cars and services slowed things down. India has long protected its local industries with high taxes on imports, while the EU pushed for open doors in areas like machinery and chemicals.
In 2024, trade between them hit €120 billion for goods alone. The EU sent €48.8 billion in goods to India and got back €71 billion. Services added another €26 billion from the EU side. This deal comes as both look to build stronger ties amid global shifts, including changes in world trade patterns.
India has signed other pacts recently, like one with EFTA countries last year. That deal with Switzerland, Norway, Iceland and Liechtenstein promised $100 billion in investments over 15 years. But the EU agreement goes further because of the EU's size and reach.
Both leaders saw the need to move fast. EU officials noted India's fast growth in cars, tech and food markets. Indian firms eyed EU strengths in high-end machines and drugs. After tough rounds, they found common ground by keeping out sensitive items like dairy and rice.
Key Details
The deal wipes out or cuts tariffs on 99.3% of EU goods going to India by value, and 96.6% from India to the EU. India drops duties on 86% of EU tariff lines right away or soon, covering 93% of the value. The EU opens up even more, at 91% of lines and nearly all value.
Wins for EU Exports
EU companies stand to save up to €4 billion a year in duties. Machinery and electrical gear, worth €16.3 billion in 2024, face cuts from up to 44% to zero over five to ten years. Chemicals, at €3.2 billion, lose duties up to 22% mostly at once. Drugs exports of €1.1 billion go tariff-free in five to seven years.
Cars get a big break too. India cuts car tariffs from 110% to as low as 10% under quotas, and parts become duty-free over time. This taps into India's booming auto market. Aircraft parts drop from 11% to zero in up to ten years.
Food items open up. Olive oil duties up to 45% vanish right away or in five years. Wine falls from 150% to 20-30%, spirits to 40% from 150%, and beer to 50% from 110%. Processed foods like chocolate, pasta and pet food lose 33% tariffs quickly.
India gains in textiles, shoes, fish and drugs. The EU drops duties on most of these at entry or soon after.
Services and Rules
Services get new openings. The EU binds access in finance and sea transport beyond what India offers others. India allows EU firms in dredging and cable-laying for the first time. Customs rules speed up checks while keeping safety tight. Rules protect brands and help small businesses.
Sensitive areas stay protected. No big changes for EU farm goods like beef, chicken or sugar, or India's dairy and gold.
"Under this agreement European wines, spirits, beers, olive oil, confectionary, and other products will enjoy preferential access to the rapidly growing Indian market," said Christophe Hansen, EU Commissioner for Agriculture and Food.
"As in any trade agreement, our high food safety standards are fully maintained. The safety of EU consumers is non-negotiable," Hansen added.
What This Means
For EU firms, the deal means easier sales in India, one of the world's biggest growth spots. Savings on duties let companies hire more, cut prices or invest in new plants. Machinery makers, drug firms and car parts suppliers get a leg up over rivals from China or elsewhere.
India's exporters in textiles and chemicals reach EU buyers with lower costs. More EU investment could flow into Indian factories and tech. Jobs may grow in both export hubs like Germany's machine plants and India's textile towns.
Trade flows could double in a few years. EU services firms enter India's finance and shipping scenes. Customs fixes cut delays, so goods move faster.
Next steps include approvals. The EU sends it to its Council and Parliament. India handles its own ratification. Once done, changes roll out over up to ten years, starting with quick wins on many items.
This pact builds resilience. It diversifies supply chains away from single partners. For consumers, it brings cheaper imports like olive oil or machines, and more choices in cars and foods. Businesses on both sides plan for the shifts, with some training workers for new rules.
