India, EU look to complete FTA legal scrubbing by July-end: Govt sources

Government sources have indicated that India and the European Union (EU) are looking to complete the legal scrubbing of their Free Trade Agreement (FTA) by July 2026, which will be followed by the formal signing of the deal finalised in January this year.Last month, India’s Commerce and Industry Minister Piyush Goyal indicated that the India-EU FTA is likely to come into force by the end of 2026, adding that all 27 EU member nations are keen on its swift implementation.As per the FTA, tariffs are set to drop on non-EV cars whose retail consumer price in India is above ₹25 lakh. The Commerce Ministry termed the actual threshold as 15,000 euros (or around ₹15 lakh) as the landing price of EU-made cars at Indian ports, which will then see price additions through taxes, registration, 28% or 40% GST, insurance, freight charges, and logistics.Once the FTA is implemented, the duty on imports of such cars made in the EU will be reduced to between 30% and 35%, from the current 66% to 110%.Duty concessions on automobile imports into India will be based on quotas set to rise over time, with segmented market access for the EU’s exports of IC-engine vehicles, EVs, and heavy vehicles. India’s Commerce Ministry said that in-quota duties will be reduced over a period of five years and will eventually fall to 10%, while Indian cars will get duty-free access to the EU market.The move is likely to benefit European carmakers such as BMW, Mercedes-Benz, Volkswagen, Maserati, Ferrari, Lamborghini, Bugatti, Renault, and several other EU-based automobile companies targeting the ₹25 lakh-plus car market in India.Several automakers import premium luxury cars as completely built units (CBUs), while many assemble their luxury models in India. The EU’s car market size is around 10 million units, while India’s market size is around 5 million units.India’s Commerce Ministry has said that tariffs on $33.5 billion out of $35 billion (over 95%) of India’s exports to the EU (as per FY24 figures) will drop to zero once the FTA comes into force. Terming it one of the biggest bilateral deals in the world, with a combined market size of nearly 2 billion consumers, the Commerce Ministry said that tariffs on 30% of the EU’s exports to India by value will fall to zero immediately.Tariffs will then gradually decline on 93% of the EU’s exports to India over a period of 10 years, while 3% of items will remain under an import quota. In return, tariffs on 90% of India’s exports will drop to zero, with an additional 3% reduction expected in phases, while 6% of exports will be covered under quotas.India’s dairy and agriculture sectors will not be covered under the FTA. The agreement will bring tariff liberalisation on 99% of tariff lines by the EU and 97% of tariff lines by India. Out of a total of 155 sub-sectors in services, India will open up 104 sub-sectors, while the EU will open 144 sub-sectors. While the EU is expected to gain in exports of wine, automobiles, and technology products, the reduction in average tariffs for India’s exports to the EU—from 3.8% to 0.1%—is expected to improve the competitiveness of Indian exports.Bilateral merchandise trade between India and the EU was valued at ₹11.5 lakh crore ($136.54 billion) in FY2024-25, with India exporting roughly ₹6.4 lakh crore ($75.85 billion) worth of goods to the EU. India-EU trade in services reached ₹7.2 lakh crore ($83.10 billion) in 2024.

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