India and the European Union have finalised a long-pending and landmark Free Trade Agreement (FTA), Prime Minister Narendra Modi announced on Tuesday, calling it the “mother of all trades”. The deal is expected to significantly deepen economic ties between two of the world’s largest economies and reshape bilateral trade flows.
According to the European Union, the agreement will slash duties on over 90 percent of EU goods exported to India, potentially saving European companies nearly €4 billion a year in tariffs. An EU fact sheet said the pact could eventually double EU exports to India.
The agreement was confirmed during talks between Prime Minister Modi, European Commission president Ursula von der Leyen, and European Council president Antonio Costa at Hyderabad House in New Delhi.
A key highlight of the deal is the sweeping reduction — and in many cases elimination — of import duties on a wide range of European products entering India.
Products that will see zero or sharply reduced tariffs include:
Machinery and electrical equipment
Aircraft and spacecraft
Medical, optical and surgical equipment
Chemicals and pharmaceuticals
Plastics, iron and steel
A portion of precious stones and metals
Tariffs on cars, among the most sensitive items, will be gradually lowered from the current peak of 110 percent to as low as 10 percent over a phased period. Duties on wines will also be reduced progressively from 150 percent to around 20 percent.
Processed food items such as pasta, bread, biscuits and chocolate — currently taxed at about 50 percent — will see tariffs completely eliminated. Duties on olive oil, margarine and other vegetable oils will be scrapped from the current 45 percent level, while fruit juices and non-alcoholic beer will also move to zero tariffs.
Beyond goods, the agreement provides enhanced access to India’s services market, particularly in financial services, maritime services and other professional sectors. The EU said this would open new business opportunities and support job creation on both sides.
Modi said the deal would benefit key Indian sectors such as textiles, gems and jewellery, leather goods, and services. He noted that the agreement covers economies accounting for about 25 percent of global GDP and nearly one-third of global trade.
Calling the deal “historic”, Ursula von der Leyen said Europe and India had created a free trade zone of nearly two billion people.
The trade pact will now undergo legal vetting, a process expected to take around six months. It will also require ratification by the European Parliament before coming into force, likely sometime next year.
(By arrangement with livemint.com)