India and European Union reach historic free trade agreement

NEW DELHI: India and the European Union have reached an agreement on what is being called the largest free trade deal in history, aimed at reducing dependency on the United States and boosting India’s exports.

Once the agreement, prepared after more than 18 years of discussions, comes into effect, tariffs on 97% of Indian products exported to the 27 European countries will be sharply reduced. Prices of several products coming from Europe, including cars, chocolates, and wine, will also decrease.

The final agreement was approved during the 16th India-EU Summit held in Delhi yesterday. Prime Minister Narendra Modi and European Commission President Ursula von der Leyen described the deal as a landmark step in India’s trade history. The deal is expected to be signed this year and come into effect early next year.

The new agreement is expected to provide a boost for India, especially after facing a 50% tariff challenge from the U.S. Over the next ten years, the EU will gradually eliminate tariffs on key Indian exports, including textiles, leather goods, footwear, marine products, spices and condiments, rubber and tea, jams and jewellery. However, certain products such as soy, beef, sugar, rice, and dairy products have been excluded from the deal.

Impact on prices in India

• Prices of more than 30 European products will drop in India. Tariffs on machinery (44%), aircraft (11%), and surgical instruments (27%) will eventually be completely removed.
• Tariffs on medicines will be completely eliminated.
• Premium wine tariffs will fall from 150% to 20%, and medium-range wine tariffs from 150% to 30%.
• Alcohol tariffs will drop from 150% to 40%, and beer from 110% to 50%.

Vehicle tariffs will gradually fall

• Around 250,000 European-made vehicles will enter India annually. Luxury car tariffs over 25 lakh INR will gradually fall from 110% to 10%, allowing more premium European car brands into India.
• Indian car makers, including Mahindra & Mahindra, Tata, and Maruti Suzuki, will get EU import concessions. Tariffs on Indian-made electric vehicles will be eliminated over ten years.
• Tariffs on olive oil, fruit drinks, and non-alcoholic beer will decrease.
• Alcohol tariffs will reduce to 40% and beer to 50%.
• The UK is not part of this agreement.