India and the European Union have signed a free trade agreement that both sides have hailed as “the mother of all deals”.
The agreement, announced on Tuesday, came together over nearly two decades of intermittent negotiations and during a geoeconomic crisis triggered by United States President Donald Trump’s trade war. European Commission President Ursula von der Leyen and European Council President Antonio Costa joined Indian Prime Minister Narendra Modi in New Delhi on Monday as honorary guests for Republic Day and its annual military parade.
“This agreement will bring major opportunities for the people of India and Europe,” Modi said while addressing an energy conference virtually on Tuesday before an India-EU summit.
“Europe and India are making history today,” von der Leyen wrote in a post on X. “We have created a free-trade zone of two billion people, with both sides set to benefit. We will grow our strategic relationship to be even stronger.”
The deal is expected to significantly reduce tariffs for India and the EU.
So what’s in the deal? And how will Trump – who slapped India with 50 percent tariffs last year in part as punishment for continuing to buy Russian oil – take it? nder the deal announced on Tuesday, however, New Delhi will open its domestic automobile market to EU imports, slashing tariffs on most cars from the EU to 30 to 35 percent, which are to be then phased down to 10 percent over several years.
It is understood that EU cars priced below 15,000 euros ($17,800) are excluded from the deal and will remain subject to higher tariffs. Cars costing more than this will be divided into three categories, each with quotas and separate tariffs.
Electric vehicles, however, will be excluded from import duty reductions for the first five years to protect investments by domestic Indian electric car manufacturers. After that, imports from the EU will be restricted to 160,000 internal combustion engines and 90,000 electric vehicles per year.
Despite these safeguards, shares in Indian carmakers dipped by about 1.6 percent after the announcement of the trade deal. Indian tariffs on 30 percent of goods imported from the EU will fall to zero immediately. Overall, tariffs on 96.6 percent of EU goods exports to India will be eliminated or reduced, EU officials said. The deal will save up to 4 billion euros ($4.74bn) a year in duties on European products.
Besides the relaxation of tariffs on car imports from the EU, existing Indian tariffs of up to 44 percent on machinery, 22 percent on chemicals and 11 percent on pharmaceuticals will, for the most part, be eliminated. Tariffs on EU aircraft and spacecraft will also be eliminated for almost all products while those on optical, medical and surgical equipment will be eliminated for 90 percent of products.
Meanwhile, spirits and wines imported to India from the EU, currently tariffed at 150 percent, will be cut to 20 to 30 percent for wines, 40 percent for spirits and 50 percent for beer.
Source: Here
