ECONOMY
India, EU clinch trade deal; tariff concessions for 99.50% of bilateral trade
- IBJ Bureau
- Jan 28, 2026
India and the European Union (EU) have concluded negotiations on a long-awaited free trade agreement (FTA) as both sides seek to cushion the impact of strained ties with the US.
The pact paves the way for freer trade in goods and services between the 27-nation EU and India, together representing a market of roughly 200 crore people.
Indian tariffs on 30 per cent of goods traded with the EU will fall to zero immediately. Tariffs will be eliminated or reduced on over 90 per cent of exports from the EU. Companies from the EU will save up to $4.74 billion a year in duties. There will be improved access for EU companies in financial and maritime services.
Besides, both the partners will have simplified customs rules and stronger intellectual property protection. India’s duties on vehicles imported from the EU will fall from 110 to 10 per cent over five years, under a 2,50,000-vehicle annual quota. These provisions are likely to benefit Volkswagen, BMW, Mercedes-Benz, and Renault. India will completely scraps tariffs on most industrial imports from the EU, including machinery and electrical equipment (currently at 44%), chemicals (up to 22%) and pharmaceuticals (11%).
At the launch of the deal, the EU will scrap all tariffs on 90 per cent of Indian goods. Zero tariffs will be extended to 93 per cent of Indian goods exported to the EU within seven years. There will be partial cuts and quotas for about 6 per cent of Indian goods. Besides, 99.50 per cent of bilateral trade will receive some form of tariff concession.
India will keep autos and agriculture out of full tariff elimination. The EU’s average tariff rate will fall from 3.8 to 0.1 per cent. Tariffs will be cut to zero on key Indian exports to the EU, including marine products (currently at up to 26%), chemicals (12.8%), plastics/rubber (6.5%), leather/footwear (17%), textiles (12%), apparel (4%), base metals (10%) and gems and jewellery (4%), among a few others.
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