- Key conclusions of the India–EU FTA
- Shifting focus to the auto sector
- The bigger picture
- Disclaimer
India and the European Union have concluded a Free Trade Agreement after years of negotiations. This is one of India’s largest trade deals and covers trade in goods, services, investments, and cooperation in areas like technology and sustainability. The EU is already one of India’s biggest trading partners, and this deal aims to deepen that relationship.
The agreement is important because it gives Indian exporters easier access to a large and wealthy market while also opening parts of the Indian market further to European companies. Over time, this can increase trade volumes, create jobs, and improve competitiveness for Indian businesses.
Key conclusions of the India–EU FTA
Major tariff cuts on both sides: Under the deal, the EU will remove or reduce tariffs on more than 99 percent of Indian exports by value. This means most Indian goods entering Europe will face little or no import duty. India, in return, will gradually lower tariffs on a large share of EU exports, though sensitive sectors are protected.
Big boost for Indian exports: The agreement is expected to benefit Indian exports worth over ₹6 lakh crore. Labour intensive sectors such as textiles, apparel, leather, footwear, gems and jewellery, marine products, and engineering goods are among the biggest gainers. Easier access to the EU can help Indian companies scale up and become more competitive globally.
Protection for sensitive sectors: India has taken a cautious approach in areas like dairy, poultry, cereals, and certain agricultural products. These sectors remain protected to safeguard farmer incomes and domestic industry, showing that the deal balances openness with local priorities.
Services and professional mobility: Apart from goods, the deal also improves access for services. Indian IT, professional services, and financial services firms get better entry into EU markets. There is also a framework to support mobility for skilled professionals, business visitors, and intra company transfers, which can help Indian talent work more easily with European firms.
Focus on future areas:The agreement includes cooperation on digital trade, MSMEs, clean technology, and regulatory issues. There is also engagement on climate related measures like the EU’s carbon rules, which is important for Indian exporters in the long run.
Shifting focus to the auto sector
While the overall deal is positive for trade, the auto sector has drawn the most attention in the stock market.
Why auto stocks reacted negatively
After news of the deal, shares of companies like Mahindra and Mahindra fell sharply, and the Nifty Auto index also moved down. The main reason was fear that import duties on European cars could come down over time. Lower duties would make premium European cars cheaper in India, increasing competition for domestic manufacturers.
Investors worried that this could impact margins and market share, especially in higher end car and SUV segments.
What the deal actually says on automobiles
The auto provisions are expected to be phased and calibrated. This means tariff cuts, if any, will happen gradually and not overnight. India has been careful to protect its domestic auto industry while still offering some access to EU manufacturers.
This also works both ways. Indian auto and auto component makers could get better access to the European market, which is important for companies looking to expand exports.
Short term fear vs long term reality
The market reaction so far reflects short term uncertainty rather than confirmed damage. Indian auto companies still have strong brands, deep distribution networks, and a good understanding of local demand. In segments like mass market vehicles and SUVs, domestic players remain very competitive.
Over the long term, exposure to global competition can also push Indian companies to improve quality, technology, and efficiency. Auto component exporters, in particular, may benefit from easier access to EU customers.
Which cars actually qualify under the India–EU deal
The lower import duties under the India-EU deal do not apply to all cars. They are limited to vehicles with a landed value of more than $15,000, or roughly ₹13.5 lakh. This threshold is designed to protect India’s mass-market and budget car segments from direct competition.
As a result, the biggest gains are expected in premium and luxury categories such as premium sedans, luxury SUVs, performance cars, and supercars. Entry-level and mid-segment cars, where most Indian manufacturers operate, remain largely insulated.
How much cheaper could imported cars get
According to a Reuters report, import duties on eligible cars are expected to fall to around 40 percent from the current level of about 110%, starting as early as 2026. This sharp cut could lead to meaningful price reductions for high-end imported vehicles, making luxury European cars more affordable for Indian buyers.
The bigger picture
The India–EU Free Trade Agreement is a long term structural move, not a short term market event. While some sectors like autos may see temporary pressure or volatility, the overall deal strengthens India’s position in global trade.
For investors and businesses, the key is to look beyond initial reactions and focus on how companies adapt, expand exports, and improve competitiveness over time. The deal opens doors, but how Indian firms walk through them will decide the real outcome.
Disclaimer
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